From ‘one man and his dog outfits’ to SMes and multinationals, the diversity of people bearing the mantle of ‘supply chain manager’ or ‘risk manager’ means there are many different views on the biggest problem areas.
For better or for worse, it’s human nature that we all see risk through the goggles of our own self-interest and performance measures. but few would argue that the dramatic evolution of the supply chain from yesterday’s simple linear model to today’s complex, dynamic networks with hundreds of interdependencies lies behind the three most common pain points in supply chains:
- The perpetual drive for increased efficiency – competitive pressures force organisations to become ever leaner in an effort to cut costs meaning there is very little margin for error.
- Lack of visibility – Our supply networks are increasingly complex and permanently reconfiguring themselves, consequently few organisations have any real picture of their end-to-end supply chain. these can circle the globe, cross several legal jurisdictions and resemble a cobweb involving numerous organisations all operating to meet their own priorities.
- Friction caused by competing demands – We are always juggling financial imperatives with the need to build in some contingency. For example, ‘just in time’ delivery of spares may be the preferred strategy of a financially focused inventory manager reluctant to tie up valuable capital in stock, but when just-in-time is just-too-late, it is a potential disaster for an individual with operational responsibilities who sees the need to build in a buffer to ensure services keep running, whether that’s through additional time in the schedules, redundant capacity, supplies or personnel.
What can risk and business continuity managers do to address these issues? in my experience, the most important step is to communicate widely. there is very little that can go wrong for an organisation that people on the shop floor or at the front line of service delivery won’t already know about. They are aware of potential problems and weaknesses because they are immersed in it at grass roots level on a daily basis. they will have experienced the everyday glitches and may already have spotted the tell-tale signs of near-misses. beyond that, watch what is happening in the world around you.
“There is very little that will go wrong in an organisation that people on the shop floor won’t know about”
Some organisations look to received best practice in enterprise risk management, and the belief that risk can be transferred through insurance, contracting or outsourcing. Financial liability can often be transferred, but as every operations manager knows only too well, the operational consequences of supply chain failure cannot. in fact, as we know, even in finance the notion that everybody could transfer risk almost caused the collapse of the international banking system in 2008.
We’ve come a long way. It is encouraging to see increased awareness of the importance of supply chain vulnerability at the highest levels. Just ten years ago, it was an issue few organisations talked about. Now it is viewed in a completely different light. Being seen to be actively engaged in improving supply chain resilience is considered to be one of the hallmarks of a responsible organisation. In BS 25999, we have an internationally recognised framework for best practice in business continuity management. The challenge is to support and actively encourage businesses to look beyond the boundaries of their own organisation to their supply chains. With well over 90% of businesses in the UK being Small and Medium enterprises (which is also the norm in many countries), I am currently working with a cabinet Office and Business Continuity Institute-led group to develop an accessible appendix to the Standard specifically geared to take into account the needs of smaller firms. So, while there’s no room for complacency, we have made great strides since the beginning of the decade.Huge lessons have been learned about managing supply chain risk but it is an extremely complex issue. We come up with awkward questions as often as easy answers – there is no silver bullet. What businesses can do is accept new realities rather than base planning assumptions on an outdated view of the business and approaches to risk management that have failed spectacularly in recent years. “We come up with awkward questions as often as easy answers – there is no silver bullet”
Looking forward, we face some interesting challenges. After a twenty-year run of relative economic stability few would doubt that we are now entering a period of extreme economic uncertainty. An inflationary environment, would turn some tenets of existing supply chain management best practice on their head. For instance, in an inflationary environment companies that have been encouraged to keep supply chains lean, holding minimum stocks of goods and raw materials, may find it makes more financial sense to reverse that policy. We’ve become accustomed to seeing year-on-year price reductions as the norm. If companies force target price reductions through without making adjustments for inflation, they will only succeed in putting their suppliers out of business.
Longer term, the UK’s chief scientist Professor John Beddington has warned that by 2030 population pressures and other factors will combine to create a perfect storm of global food, water and energy shortages. A recent report by analysts at the bundeswehr (German Federal Defence Force) predicts that near-term oil shortages will unleash public unrest and profound disruptions for Germany and other industrialised societies.Supply chains will be affected. With easily accessible oil supplies running out, forcing the price of crude to skyrocket, supply chains that span the globe on the back of cheap oil may simply not be viable. in this, like so many other things, we are going to have to learn to do things differently.
In conclusion, as systemic disruptions such as the foot and mouth crisis, fuel protests, financial collapse and erupting icelandic volcano have demonstrated in recent years, no matter how robust we believe our own organisations to be, we are all affected by seemingly unconnected external events that occur on a regional, national and international scale. Whereas, traditionally, supply chain disruption was mostly considered a problem for manufacturing environments, in today’s interconnected world, businesses across all industry sectors are vulnerable to any event that impedes the movement of money, information, people, goods and services.
To achieve true resilience, business continuity managers need to recognise that they are only as strong as the weakest link in their supply chain. Where possible they should coordinate their contingency plans with their critical suppliers. Mapping the many interdependencies that undoubtedly exist along their supply chain may not be practicable, but planning workarounds for the loss of critical services or supplies is a good starting point. in this age of globalisation the words of the poet John Donne have never had more resonance: “No man is an island”.
As an award-winning senior lecturer for Cranfield University, Dr Helen Peck teaches a range of resilience, security, defence and supply chain-related programmes at the MoD run Defence Academy at Shrivenham and elsewhere. Her work contributes directly to the development of UK national emergency planning, as well as management practice. She has published numerous academic papers, authored several books and is a regular speaker at academic, business and defence conferences around the world.
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