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Business INSIGHTS e-News for Manufacturers
What's Your Risk Management Strategy?

Thinking about the unthinkable can ensure your supply chain is strong.

While 90% of the companies recently surveyed by APQC said they have an enterprise risk management (ERM) strategy, most have less than three years of experience with it, and only 17% of the companies said risk management was "greatly integrated" into their strategic planning. "The biggest risk in many organizations is simply not accepting the internal message that bad things might - and in fact will - occur," says Mary Driscoll, senior research director for APQC.

Looking both inside and outside your organization, smart supply-chain risk management strategies will build your company's supply-chain resilience.

Begin with a Map

MIT's David Simchi-Levi advises mapping your suppliers, and their suppliers, to understand capacity and sourcing redundancy throughout the true supply network. Then ask yourself some of the following questions:

  • What is your data-gathering process for sensing adverse external events?
  • Have you used operational data to see how various scenarios may affect you?
  • What strategies - like dual sourcing or making sure suppliers are not clustered in one geographic region - do you use?
  • Do you understand where all your parts and materials come from?
  • What commodity markets do you depend on and how volatile are price and availability in those markets? (For example, most rare earth materials come from China. Do you know where else you could obtain those materials?)
  • Does your product-development strategy include replacing commodities with more common materials?
  • Do you have a process for monitoring end-customer preferences? (For example, the issue of "pink slime" in processed beef.)

For your company's supply chain to be resilient, the CEO and other high-level company leaders must be closely involved in risk management at all times, support the risk management strategy, and continuously talk about how it integrates with the company's business strategy. APQC's Driscoll says, "The true ERM leaders ensure that the conversation does take place, that the organization thinks the unthinkable. Indeed, the best-practice partners in this study made a priority of opening up the debate and discussion, thus making all managers risk managers and ensuring that all plausible risks are considered."


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