In unpredictable economic environment, is a clear understanding of a company's supply chain and the associated risk is essential. Many organizations, while recognizing the crucial role played by their supply chain with respect to their overall success, little or no effort to quantify the risks associated with supply chain inefficiencies. In "Understanding Supply Chain Risk: A McKinsey Global Survey"two thirds of respondents say that the risks to their supply chains have increased greatly in the last five years. Of the responding companies 25% have no formal risk assessment, while 39% of executives only "the feeling is something capable of mitigating risk." 1
Why is this so important? What are the consequences if your organization has an interruption in the supply? According to Paul Michelman, 2005, in his article in the Harvard Business Review, "A Framework for Risk Management", 80% of large companieswill face a crisis of 10 days or more every four to five years. Affected by this is, will suffer 73% of the area or a significant long-term implications for the economy, 43% are never enough to resume business again, and those that open again, only 29% will be in operation two years later. The result of a 10-day interruption of less than a 10% chance of survival strength. 2 Consequently, the combination of the complexity of the supply chain is, globalization is increasing in the regulation and our current economicDownturn only exacerbate the challenges companies face today.
What can be done to mitigate such uncertainties and risks? Best-in-class companies review their supply chain, and the development of skills, processes and tools necessary to compete in today's unpredictable global economy. Ask yourself the tough questions, and exactly the supply chain from multiple dimensions. These include:
• How do we define quantifiableRisk, and we agreed and consistent in our definition?
• Are our suppliers to meet our expectations on delivery, cost, quality, range and security?
• Is our focus by category, geography or supplier spend unnecessary risks? Let's say more than in terms of (quality, reliability, business continuity, spending, etc.) risk?
• How can we reduce risk, lower levels of the suppliers?
• Did we need the necessary knowledge and skills to improve our supplyChain and procurement personnel to meet the complex needs of our current environment?
• Have other departments to understand their role in supporting a best-in-class supply chain?
• Have we documented and qualified all our suppliers with the requirements for various regulatory agencies and audit requirements to fulfill?
Until an organization can answer these questions is affirmative, the risk of failure high. Through a proactive, unbiasedReview all links in the supply chain, the risks can be fully recognized and mitigated. This in turn will allow for organizations to weather the current economic crisis and remain a viable, economic unit.
No matter what industry you are serving, or the size of organization you are a part, there are several steps you can take to the efforts, which may currently be in process improvement in your organization.
• Consideration of financial, operational, and the trade balance of exposureYour most strategic and mission-critical suppliers. All too often the investigation of solvency to the original supplier sourcing activities restricted. You only need to pitch the newspapers or turn on the evening news to recognize that the health of even the seemingly stable companies can quickly degrade. Have any of your suppliers closed their doors due to the current economic crisis?
• Continuous monitoring for early warning signs of suppliers. Frequent requests for early payment, or changesSales and support staff, can a decrease in the quality or shipment delays indicate that the supplier cut too deeply into their work ...
- Increase the frequency of supplier performance reviews. Aberdeen Group finds that these companies that regularly performance reviews with suppliers, more than two, thirds of these behaviors on a rare basis - quarterly, half yearly or annually. Against the backdrop of highly volatile markets, where credit is tight, you may want toto consider strengthening these reviews at least quarterly, with the most important strategic and mission-critical suppliers and semi-annually on your next level of suppliers. Even when it comes to measuring the performance of suppliers, which are not confined to the top percentage of spend. The more vendors you measure, the less likely you are to get caught on the wrong foot.
- Automate your supplier management process. The above steps can be worth time-consuming but the effort when you consider the riskPrevention potential of these measures. Leading spend management organizations are facilitating this process through the use vendor management tools that combine self-service portals for providers to publish and manage their own profile information (and workflow for routing supplier profiles for review and approval ), scorecards and performance measurement utilities, and project management functions for corrective action management. The use of these tools can improve the visibility, control risk, andYou can use the supplier's management to expand a wider part of your supply base.
For additional assistance on this issue, contact Tefen at: cpriamo@tefen.com
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