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Where do I start Supply Chain Risk Management in my supply chain?

Implementing Supply Chain Risk Management (SCRM) is as much about changing the mindset of people, as much it is state-of-the-art tools and processes. I firmly believe that if every person operating within the supply chain is made aware of the risk associated with each decision, half the distance to success is traversed. Ability to foresee and assess the impact of the risk is probably the toughest thing to instill across supply chain, rightly so, for multiple reasons.

1.       Operations managers across supply chain typically operate in silos. Although they are extremely well versed with their functional area, their understanding of how their function will impact the entire supply chain is often missing. They are not to be blamed for this, as they were never required to develop that view. This is the first major obstacle in implementing SCRM program. Developing a holistic view of multiple supply chains within the organization and how each function knits, is the first and foremost requirement.

2.       My first reason could be wrong as I have come across Operations Managers, who are in effect, are supply chain managers in all aspects but the designation. The holistic understanding of supply chains is a hygiene factor, but that’s not enough. Ability to assess and quantify risk scenarios is of vital importance. Quantification uses anything from gut feeling to experienced speculation – and not always scientific tools and techniques. Organization needs to invest into researching and designing methodology to assess risk across all supply chain functions and processes.

3.       Supply Chain Risk Management is in a nascent stage. Early adopters have developed in-house solutions to enable few processes. However, enterprise-wide SCRM solution remains a white space. Such a solution can contain simulation capabilities to aid business users in making informed decisions in context of Supply Chain Risk. It could also contain integrated view of supply chain processes and how, mitigation strategy employed in one area could benefit the entire supply chain. It should provide dash-board capabilities where the Supply Chain Owner could monitor on day-to-day basis, how much risk he/she is posed with.

While such tools are under evolution, one need not sit idle. Supply Chain Risk Management starts from - bringing the change in mind-set which by itself is a herculean task. Enabling “risk-conscious decision making” approach is the next step and that can aided by a plethora of research done by academicians. Supply Chain Operators can be equipped with simple excel tools to assess and report Value at Risk (VaR) on periodic basis – starting on a monthly basis and reducing the frequency as the process reaches the desired maturity level. The assumptions for the assessment should be well documented and reviewed monthly by monitoring council within each function. The same exercise needs to be repeated at organizational level with key stakeholders such as marketing/sales, finance and operations/supply chain functions being involved. Early adopters should leverage this opportunity for creating awareness to shareholders about the best practice for gaining their confidence.


I think your insights are right on the mark. Many companies are just awakening to the increasing reality of supply chain risk. And, very few companies have much of a strategy in place. As you accurately state, it needs to be a core part of an organizations DNA. Why? Because supply chain risks aren't just isolated events anymore. We think of them this way because we use things like Hurricane Katrina as examples. But the reality is less spectacular, but much more frequent.

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