What You Can Do to Minimize Your Company's Supply Chain Risks - Insurance Thought Leadership

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November 2, 2011

What You Can Do to Minimize Your Company's Supply Chain Risks

Summary:

Supply chain failure is the most common failure in a company’s operations in a disaster, and managing your supply chain is the key to competing successfully. However, there are ways to minimize your risks.

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Supply chain failure is the most common failure in a company’s operations in a disaster, and managing your supply chain is the key to competing successfully. However, there are ways to minimize your risks.

This is Part 2 of a two-part series on supply chain risks. Part 1 can be found here.

In Part 1 of this series, we discussed the current challenging business environment, with increasing operating risks, growing demand and supply uncertainties, new supplier and outsourcing alternatives, increasing product and service complexities, more demanding and diverse customers, globally interdependent operations, and continuing cost pressures. We learned that more than 80 percent of businesses are unprepared for their supply chain risks.

The continuing disaster in Japan has demonstrated the supply chain vulnerabilities that even major corporations face. Auto manufacturers such as GM, Toyota, Nissan, Honda, Renault, BMW, Daimler Peugeot, Fiat and Volkswagen; electronics giants Sony Ericsson, Apple, Toshiba and Hitachi; and aerospace leader Boeing are among the companies that were forced to curtail or halt production of some products in the wake of the devastating earthquake/tsunami/nuclear plant leak.

So, what should a business do to begin making its supply chain disaster-ready? Start by asking these critical questions:

  • What risks and vulnerabilities do we face at each step in the supply chain?
  • How can we design our supply chain structure to minimize risks we cannot manage?
  • How fast can the supply chain respond to changes and at what costs?
  • How can the conflicts, constraints and capacity limits of growth plans be managed?
  • How and where is complexity impacting the supply chain, and what can be done about it?

Remember, most supply chains were incrementally built over many years, under very different economic and business conditions. Still, we see that executives are generally approaching supply chain and investment decisions with dated, variable-cost based tools and thinking. It is now necessary to address the new operating complexities and global interconnectivity of many supply chains by:

  • Analyzing supply chain external and internal risks and critical vulnerabilities;
  • Identifying and prioritizing suppliers’ threats;
  • Evaluating business resiliency threats across the supply chain and providing actionable plans to optimize efficiency, metrics, and customer service performance;
  • Driving return on investment and shareholder value by increasing asset productivity and capital deployment;
  • Identifying opportunities to make breakthroughs in supply chain performance;
  • Aligning supply chain structures and operations explicitly with business and market strategies.

What is the bottom line?

You can create your company’s future, or events and competitors will create it for you. Supply chain leaders are developing better insights, tools and frameworks for building and managing “next generation” supply chains. They are more effectively addressing diverse risks, selecting critical partners and suppliers, deploying capital for increased return on investment, and developing the global supply chain management skills needed for the future. Are you ready? Hope is not a strategic plan.

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