Supply Chain Risk Management: Planning Smart

Smart Supply Chain Risk Management Planning

Supply chain risk management (SCRM) is an art and a science. Pursue risk mitigation as an art, and you’ll benefit. Pursue it as a science, and you’ll also benefit.

But when you pursue SCRM as an art and a science, you’ll benefit from their synergies.

So how would you do that?

For starters, pursuing SCRM as an art implies relying on anecdotal data/or historical data that may or may not truly reflect your business today. Trends change. They change faster than ever.

The face of globalization has changed. Geo-political factors weigh more heavily on business decisions. And the economy, the change in how we work, and the headlong rush to achieve sustainability can significantly alter your historical data.

That makes this type of approach less sound because your anecdotal or historical data don’t reflect what might be structural changes going forward.

Likewise, a scientific approach that relies only on numbers would also be lacking. Perhaps, you might consider this approach more robust because it is data-based; it may miss nuances. And those nuances may have a dramatic effect on your approach.

Take the idea that recession has set in. If that’s true, decisions based on that will affect your business plan. Although, strictly speaking, the criteria for a recession have been met (two-quarters of decline in the GDP (today’s recession looks different. At least that’s what the administration says.

The GDP dropped by 1 percent. Yet, Treasury Secretary Yellen says the U.S. is not in a recession. She cites strength in the jobs market of almost 4000,000 jobs per month as a case against concluding the economy is in decline.

She also cited the government efforts to reduce gas and prescription drug prices and other areas that will become clear in the long-term.

It should be clear this approach also falls short of providing an accurate and predictable outcome. The data here is mixed or not yet available. Drawing conclusions from unclear data leads to subjectivity. And in a political environment that can skew the outcome.

So a hybrid approach may offer the best way to assess and develop your SCRM plan.

For starters, let’s look at risks and opportunities, beginning with the results of a relevant survey.

Take a Systematic Approach to Reduce Your Risks

The Association of Supply Chain Management (ASCM) and Loyola University conducted a survey on the benefits of SCRM. In conducting the study, ASCM  asked respondents to rank their top concerns and their preparedness levels.

Here are the top 10 risks, from least prepared to most prepared, survey respondents listed:

1) Geopolitical Trade Wars; 2) Weather/Climate Change; 3) Human Resources; 4) Cyber Attacks/Data Breach; 5) Strategic/Competitor Risk; 6) Reputation/Brand; 7) Regulatory Compliance; 8) Internal Capacity; 9) Supplier Performance; and 10) Financial/Capital

This list provides an excellent place to start your SCRM planning. You can use this list or change it based on your organization’s needs. Either way, you have a useful template to start your planning. For this post, we’ll refer to the ASCM Survey list.

Now that you have a Top 10 list, you can determine the feasibility of mitigating those risks.

Sort Your Supply Chain Risks for Effectiveness and Efficiency

The next step you should take is to determine whether or not these risks are controllable. You

might find some of these don’t fall neatly into either category. Let’s use this list to identify controllable, uncontrollable, or both.

1)   Geopolitical Trade Wars–Controllable

2)   Weather/Climate Change–Uncontrollable

3)   Human Resources–Controllable

4)   Cyber Attacks/Data Breach–Controllable/Uncontrollable

5)   Strategic/Competitor Risk–Controllable

6)   Reputation/Brand–Controllable

7)   Regulatory Compliance–Controllable

8)   Internal Capacity–Controllable

9)   Supplier Performance–Controllable

10) Financial/Capital–Controllable

This is a subjective analysis, and yours may differ based on your capabilities and resources. Accepting this as a guideline, we have eight (8) controllable risks; one (1) uncontrollable risk; and one (1) risk that falls into both categories.

Next, you can classify them according to specific outcomes and priorities.

In laying out your strategy, taking this objective approach, you’ll lay out an effective and efficient SCRM plan. Now it’s time to address the subjective aspect of SCRM planning.

Simplify and Tailor Your SCRM Plan with a Hybrid Approach

Looking at this strategically, you’ll want to consider the feasibility of implementing your draft plan. You should consider cost, time to implement, and Return on Investment, to name a few.

  • Do you want to focus on increasing the speed of operations?
  • Do you want to achieve end-to-end visibility?
  • Do you want to enhance your agility?
  • Do you want to maximize resilience?
  • Or are you interested in achieving a combination of these?

There are more criteria to consider, such as improving customer service or sustainability. Whatever your criteria, they’ll serve as a filter to keep you focused. This will help you save time and money by applying your resources to what’s most important. Finally, this process will simplify and tailor your SCRM planning process.

As the information in this post asserts, you can achieve SCRM as an art and a science. Their combination leads to a robust SCRM plan that’s both defensive and offensive.

Most important, their synergy delivers more than the sum of their parts. This approach also demonstrates that one size does not fit all. Instead, a tailored approach will boost your benefits while securing and stabilizing your supply chain.

Next Steps to Consider

This hybrid approach is proactive because it is anticipatory, purposeful, and pragmatic. That helps maximize your opportunity for success while diminishing volatility and unpredictability.

At American Global Logistics, we’re diligent and disciplined in mitigating risk and maximizing opportunities. Our experience tells us there are no shortcuts to developing a sound SCRM plan.

We approach SCRM planning as an art and a science. We’ve spent years honing our craft, and everything we do reflects that. We strive to achieve agile, resilient, and seamless logistics flows.

At AGL, we’ll prepare and position your business for success. We’ll fine-tune your business processes. And we’ll give you peace of mind by reducing disruptions while diminishing volatility and unpredictability.

Contact us now if you want to experience the same peace of mind our customers do. We’ll be glad to advise you on how we can help you prepare and position your business for success.