A.T. Kearney quotes an interesting figure in their Assessment of Excellence in Procurement Study that about 80% of “follower” companies are one natural disaster away from a major business disruption. By contrast, according to their analysis, leaders use risk-impact analysis, financial risk management (such as hedging) and disaster planning as ways to protect against unforeseen threats.
With some very public disasters caused by major disruptions in the supply chain it’s hard to believe that many Supply Chain organizations do not include risk assessment and planning as part of their strategy deployment.
Risk Planning doesn’t have to be complicated.
A brain storming session with your team identifying possible risk events is easy and gets the involvement of your team. Then a simple risk impact analysis (a XY table) assessing the probability and impact of the potential events can be carried out. High, medium and low are the only scores you need to worry about.
Potential events include strikes at the supply base or its transportation network, poor service, crop disasters, key inputs cost escalation, cost saving project delays, quality, poor supplier relations to name a few.
Risk management planning should receive the same attention as planning cost saving projects. SMART objectives are developed and subsequent plans are included in personal and team objectives.
Continuous Risk Monitoring
A monthly review of potential risk events and risk management activities should be part of your agenda. One event could wipe out all your hard work and destroy a career. Isn’t it worth a half hour of your time each month?
Gary Lajoie is an end to end supply chain professional with expertise in procurement, manufacturing & distribution. Renowned for improving margins by relying on Lean techniques and innovative thinking to progress the organization’s cost saving activities beyond the idea of “picking the low hanging fruit” and uncovering great opportunities “buried in the roots”. Described for his ability to balance the culture and vision of the organization with a hard driving passion for eliminating excess found, but seldom noticed, throughout the supply chain.