The Global Supply Chain and Risk Management Survey found five key principles tha

Question

The Global Supply Chain and Risk Management Survey found five key principles that companies can learn from to better manage today’s risk challenges to their supply chains and prepare for future opportunities. 1. Supply chain disruptions have significant impact on company business and financial performance. 2. Companies with mature supply chain and risk management capabilities are more resilient to supply chain disruptions. They are impacted less and they recover faster than companies with immature capabilities. 3. Mature companies that invest in supply chain flexibility are more resilient to disruptions than mature companies that don’t. 4. Mature companies investing in risk segmentation are more resilient to disruptions than mature companies that do not invest in risk segmentation. 5. Companies with mature capabilities in supply chain and risk management do better along all surveyed dimensions of operational and financial performance than immature companies.

Explanation / Answer

Various types of unexpected risks such as internal risks (like sudden labor strike) or external risks such as technological, political, economic, social, legal and others can occur in the supply chain, giving rise to significant disruptions.

Hence there is a need to assess the capability of a supply chain to cope with unexpected risks. One can carry out supply chain audits from time to time to find out whether suppliers have the flexibility to deal with changes in order deliveries and whether they have the right procedures to handle various problems. These audits can also reveal whether the organization has contingency plans to deal with unexpected risks in the supply chain. One should also ensure through these audits whether the organization has a separate response team to handle emergencies.

One should also carry out periodic reviews of supply chain processes and systems to find out performance bottlenecks.

Further, one should find out whether the organization test its contingency plans regularly by benchmarking its contingency plans with those of various suppliers.

Also one can put in place a comprehensive supply chain measurement system to evaluate capability of supply chain. e.g., Wal-Mart, Cisco Systems, Procter & Gamble have comprehensive supply chain measurement systems.    

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