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Have you considered all of the potential risk disruptions in your supply chain?

December 1, 2016

 

There are numerous supply chain disruptions that can occur on any day, at any time.  Have you sat down and thought about all of the possibilities - natural disasters, weather, terror attacks, politics, foreign government policy changes, labor strikes, infrastructure disaster, contaminated food, and more.  If not, you should get started.  If yes, do you have a plan to manage these risks?  While most of these types of disruptions cannot be prevented or stopped, having a plan in place in the event that they occur will help to minimize a disruption in your supply chain.  Companies that have these plans in place have successfully made it through major disrupting events while others suffered the consequences.

 

There are three overarching steps in risk management for supply chain disruptions.  First, the company must sit down and think of all of the potential disruptions, from internal to external, from the beginning of the supply chain to the end, and from organizational to operational.  Second, the risk has to be quantified somehow.  It is not possible to predict the likelihood of most of these events, but you can determine a good ballpark estimate on likelihood for each event.  Also quantify it by applying a dollar value to the potential loss.  Or, maybe it is not a dollar value, but it is product quantity or the number of customers lost due to the event.  For instance, if you sell food with salmonella, and that gets into the news, you may lose customers due to trust.  What is the overall impact?  The third step is to make a mitigation plan for each of the events.  To get started, begin with the highest impact event from the previous step.  Which one will hurt the most?  Make a detailed plan and move on to the next one and so on.  

 

Now that you have the plans, communicate them.  A plan will do no good if it is written, sits on a shelf and is never looked at.  Communication is key when a major disruption occurs.  First, all concerned or those who have a role in the plan must be aware of their role so that they can act right away when it happens.  Second, communication during the disrupting event is crucial.  As soon as it happens, everyone along the supply chain should be aware so that they can act on their part of the plan.  This applies to all levels of the organization as key personnel will have to make decisions, and management and other personnel will have to carry out the plans at the operational level.  

 

While this is just a high level overview, there are many resources out there to help with risk mitigation/management and deriving these plans.  Some sources include APICS Operations Management Body of Knowledge, the Supply Chain Operations Reference Model (SCOR), and NC State's Supply Chain Resource Cooperative.  There are many, many articles out there aside from these sources.  Bottom line, the resources are available, and if you have not prepared your company from a major supply chain disruption yet, you should.  You do not want to lose your success or suffer a major setback in a matter of moments if an event should occur.  If you have plans in place already, have you communicated the plans thoroughly?  Do all involved know what to do the moment a disruption occurs?   Have you considered any new threats since the plans were made?  It is a good idea to update these plans every few years for new threats, remove old ones, update for changes in processes, update impact value, etc.  You cannot prevent or even predict most of these major supply chain disruption events, but you can be prepared for them!

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