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Risk management key to successful supply chains

20th Nov 2013
Risk management key to successful supply chains

Each step of the supply chain must take risk into consideration if procurement is to run successfully, according to Professor Richard Wilding of the Cranfield School of Management.

Speaking at the ‘Resilience, Sustainability, Integrity and Emerging Trends – Managing Supply Risk in the 21st Century’ CIPS event in east London, Wilding said a quarter of the value of a business could be written off if there are significant problems in the supply chain.

He put forward ‘a temple of supply chain resilience’ which looks at the foundations, pillars and roof of a good supply chain.

Wilding said the temple floor needs to be product design where businesses should consider the raw materials used, where these will be sourced from and whether other materials can be used.

For the pillars, buyers need to look at agility to ensure flexibility within supply chain operations; ensure they are collaborating internally and externally; embed a culture of supply chain risk management, so that people ask ‘what impact will this have on the overall risk profile of my supply chain?’; and to consider the equipment needed in supply chain design and engineering.

To complete the temple, Wilding said there needs to be supply chain transparency. “This is required to reassure all that the supply chain is operating effectively. It requires connected information systems and good communication.”

Wilding added that many companies do not understand that their supply chain strategy needs to link to their business’s corporate strategy. “You’d think that everyone would have this in place, but often there’s a disconnect within the business that we need to address.”

He also encouraged procurement teams to think about the language they use to communicate with other departments within the business. “Often what we do as supply chain people is say: ‘We’ve got 95 per cent availability and we’re going to get it to 98 per cent,’ but what does that mean? If you say: ‘You’re currently losing £500,000, we can help you reduce that to £200,000,’ they’ll start to understand what you’re talking about.”

Wilding added: “If you go about supply chain risk management correctly, you could demonstrate the link between supply chain risk and the success factors in the market and therefore improve your competitive position and profit.”

To read more: http://www.supplymanagement.com

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