Portrait of Best-In-Class Risk Management

Risk management can help manufacturers weather supply chain storms.

It's not easy being global, based on the results of a study undertaken by analyst firm Aberdeen Group. The survey, which encompasses both industrial and consumer goods manufacturers and includes respondents from North America, Europe, Asia and Latin America, found that 58% suffered financial losses from supply chain disruptions over the past year. Some of the leading culprits:

  • supplier capacity did not meet demand (56%)
  • raw materials price increase or shortage (49%)
  • unexpected changes in customer demand (45%)
  • shipment delayed, damaged or misdirected (39%)
  • fuel price increase or shortage (35%).

One of the keys to building a risk-resilient supply chain, Aberdeen says, is to train employees on disruption response procedures, such as how to communicate delays to customers, when to elevate a disruption to the appropriate senior staff member and how to place a new urgent purchase order. Those manufacturers who have best-in-class risk management procedures in place are twice as likely as all others to have no major impact from supply chain disruptions.

The accompanying PACE (pressures, actions, capabilities and enablers) chart illustrates how manufacturers can progress from identifying a problem to focusing on a solution, and as a result become best-in-class themselves.

Pressures

  • Growing global operations

Actions

  • Improve supply chain data quality used for decision making
  • Collaborate more effectively with supply chain partners to jointly manage supply chain risks
  • Redesign the supply chain

Capabilities

  • Supply chain organization driving supply chain risk initiative
  • Manage and/or assess supplier risk, logistics congestion and capacity, and risk profile of country
  • Role-based visibility views for other departments and external partners (e.g., customers)
  • Supply chain risk assessment matrices

Enablers

  • Supply chain visibility software
  • Order management software
  • Inventory management software
  • Demand management software

Source: AberdeenGroup

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