Sep
16
Managing risk in your supply chain
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One of the common things you might do if you work in the supply chain function is to assess risk.
Risk is defined as “A possibility or threat of damage, injury, liability, loss or negative occurrence that is caused by external or internal vulnerabilities”
While risk management is a term that’s often associated with Project Management it’s vital that those working in an organizations Supply Chain are also aware of the process.
Examples of Supply Chain risks
Here’s 5 common supply chain risks
• Critical vendor suddenly goes out of business
• Raw Material suddenly becomes unavailable
• Demand plan proves vastly incorrect
• Unable to access key Logistics routes
• Recall notice given by distributor of critical component
It’s also worth pointing out that risks may not just be close to home. As Supply Chains become ever more global these risks can extend geographical boundaries.
Supply Chain Risk Management
Sometimes called SCRM (Supply chain Risk Management) the key objective of the process is to reduce vulnerability. Risks may not go-away but at least you’ll be aware of how you’ll monitor and control them.
Types of supply chain risk
Risks can be either everyday (a component becomes difficult to obtain) or exceptional (a boat carrying product sinks) but however threatened your organization is it’ll need resource and a process to manage risk.
Typically there are 2 main risks, External and Internal
External risks might include
• Customer demand variability
• Environmental risks
• Supply risks
• Equipment risks
Internal risks might include
• Planning risks
• Manufacturing risks
• Business risks
Risk management is a well established path and there’s a multitude of online resources to help if your looking to establish your process (note Risk management is not just an excel sheet).
The typical process will involve 5 key steps.
1/ Identifying the risk
2/ Analyze the risk
3/Assess and evaluate the risk
4/ Take action to control the risk
5/ Review and control the risk
The process will usually involve resources from various functions within your business and often key stakeholders from outside.
Control processes usually include periodic meetings where the team will review a risk register (a list that captures risks) and reviews these risks to ensure mitigation / control is appropriate whilst also adding new risks that have emerged since the last review.
Summary
Whether you like it or not risk management is something that is key to your supply chain. Ignore it at your peril!
Sep
15
We’ve enthused about S&OP (SIOP) in some of our previous posts (SIOP Process)– we really think it’s one of the bedrocks of an efficient organization.
The problem is that many organizations find it difficult to implement.
While S&OP isn’t rocket science (if you use a common sense approach you’ll do well) many organizations find it extremely challenging to get right.
But why is this? If an organization recognizes the benefits and the process is based on a set of common sense activities then it should be easy right?
Here’s our list of 5 common mistakes when approaching SIOP.
1/ Lack of executive sponsorship.
If the leadership team don’t own SIOP (and are actively engaged) then its success will be limited. Often they aren’t supply chain specialists and while the approach is recognized and understood, the output may need to be in such a format that is easily digestible with decision points and outcomes described in easy to understand language (and where consequences are also easily represented). Clearly identify where leadership become involved in the process (e.g. signing off plans) and that their roles and responsibilities are clearly understood. The SIOP team should understand the role of the leadership team and how they interact with the process.
2/ Ease of use
Don’t make it too hard. SIOP should be easy. If you develop a complex process which people fail to understand and operate effectively you’ll end up minimizing your results. (Whilst failing to get buy in). Really work hard to keep it simple.
3/ It’s a team sport
SIOP only works when cross functional teams come together and work the process. If it’s heavily led by one function (without buy in from the others) it’s doomed. People need to come together and understand the objective and the goal. Leadership can help through promoting roles and responsibilities (including delegated authority). Remember that if a particular team isn’t participating then results can be skewed and the SIOP process will fail.
4/ Process, process process
SIOP is a process. As such ensure you have appropriate documentation, training materials, meeting cadence etc. This should not be free-form where you have no guide/plan on what your doing. Do not make it up as you go along, SIOP should be regimented, step by step. Everyone should understand the process (because you’ve made it simple), their roles within it, how to do it and how to process the results.
5/ Flexibility
One common result from SIOP is that it produces one plan offering zero flexibility. If things happen the business is unable to react (as it has no alternatives) and problems happen. Consider how you can plan best/worst/medium cases (still following the SIOP process). This provides flexibility and an ability to tune as you go.
Summary
I always think of SIOP in terms of continuous improvement. There are many things you can learn from your business from deploying SIOP and you should not be blinkered that you shouldn’t learn from the process and tweak it from time to time in order to optimize it. See what works, what doesn’t and hone it, remember it’s your process so make it work for you.