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Some Current Observations on the State of Supply Chain Risk Management

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Over these past two weeks, in the roles of both facilitator and participant, I’ve had the opportunity to participate in two supply chain risk management discussion forums involving senior and mid-level supply chain management professionals.   I have observed that the subject of increased supply chain risks is indeed occupying increased mind share among these executives, but it still seems to me that the definition of risk is different to everyone,  and is more dependent on vertical or functional views of risk. An overall umbrella of risk management strategy for the most part, remains stovepiped.

Executives continue to validate that increased globalization, the effects of the ongoing severe economic downturn, and increased incidents of natural disasters have all elevated the occurrence and magnitude of risk.  For procurement professionals, risk is directly associated with supplier monitoring and management. Mitigation is tied to early warning mechanisms related to supplier’s business activities, accelerating invoice payments to financially troubled suppliers, as well as having back-up supplier plans in place.  Logistics and transportation professionals view risk in the context of the spike in energy prices last year, which many believe can occur once again. Financial teams are focused on a potential spike in inflation which would impacts both input and output costs. Manufacturing and materials professionals while continuing to zealously pursue lean and cost control initiatives, are deeply concerned that leaner operations present increased vulnerability to a disruption in the business when something abnormal occurs.

One of the most interesting observations I have made is that the question of who in the organization has the most ownership of risk remains clouded.  Sourcing and procurement professionals feel that they are the logical point focus to drive awareness, but clearly do not desire to have enterprise risk management ownership.  One executive described this as a “career limiting’ decision. While the majority of executives are willing to intellectually accept the fact that enterprise risk management can best be approached in a cross-functional team perspective, singular leadership of such a team does not seem to be evident in the majority of organizations that I observed.

My belief is that supply chain risk management has to have senior executive awareness, sponsorship and ongoing focus.  Any firm with a vulnerable supply chain, particularly one that is global in scope, should have an active cross-functional team with the authority to identify risk vulnerabilities and define proper mitigation strategies. 

From these discussions of these past two weeks, my sense is that more cross-functional emphasis and leadership is required.

What’s your view?  Are you sensing these same vertical vs. horizontal risk management efforts in your company or organization?

Bob Ferrari

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