PwC Report Urges Manufacturers to Identify, Prevent Supply Chain Risk

Recent global events (civil unrest, volcanoes, the Japanese earthquake, etc.) have focused new attention on the importance of supply chain resilience. Incidents like these underscore how globalization has connected companies, suppliers, consumers and the world around them in new ways.

How should manufacturers respond to this intricate interdependence? Are there specific steps they must take to achieve excellence in today's connected marketplace?

A new whitepaper from PricewaterhouseCoopers (PwC) deep dives into these questions and concludes that essentially, there are five key issues that play an important part in determining whether manufacturing companies will rise to the level of excellent, adequate or merely mediocre. Those five key issues are:

Identifying and preventing supply chain risk

Linking demand planning with the whole value chain

Making customer and supplier collaboration real

Addressing lifecycle opportunities and demonstrating sustainable value

Attracting the people and skills needed for the future

In the report, PwC does a good job of breaking down the first bullet point, the task of identifying and preventing supply chain risk. Ultimately, the firm recommends that you mitigate supply chain risk by:

gaining visibility over critical suppliers (these may not necessarily the same as those who make the largest value contribution the manufacturing process),

connecting the supply chain to real-time data and

evaluating the financial stability of suppliers.

I would go even a step further and add a fourth recommendation to that list:

You must also recognize that compliance management is now a critical component of a comprehensive risk management strategy. Today's compliance landscape is evolving quickly and without proper attention, failure in this area can lead to significant supply chain disruptions.

As the report concludes:

Factors such as geopolitical, economic and financial market risk are an ever-present. As the experience from the Japan earthquake has showed, companies need to identify and monitor all the different types of risk that could affect supply chains and match them with appropriate remedial measures such as inventory cushions, dual sourcing or dialogue with suppliers on alternative production.

The 24-page PwC whitepaper, Achieving Excellence in Production and Supply, is available here.

TAGS: Finance
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