SUPPLY CHAIN MINDED

Supply Chain Globalization: Great Opportunities and New Risks

Supply Chain Globalization: Great Opportunities and New Risks

What does risk mean for today’s supply chain? Increasingly, both multi-national and local companies must be prepared for events – anywhere in the world – that could force them to find a new supply source or reroute their supply chain. To aid the ability to react, many companies are turning to complex technologies while others are exploring new, increasingly global sourcing options. Every organization must determine its risk tolerance with regard to supply dependency, intellectual property theft and reputational harm, and implement the right supply chain management framework for its operations.

 

Risks of Dependency, IP Theft and Reputational Harm 

One major concern of switching to a low-cost supplier might mean becoming dependent. At the same time, mid-market organizations may not have the purchasing power advantage and global sourcing opportunities that larger competitors have. Many retailers may need to go with the lowest product cost just to compete – businesses must often choose between cost and dependency.It’s also important to note that IP theft is on the rise and enforcement varies greatly. Large organizations may have better options in offshore manufacturers than their mid-sized counterparts, so small organizations must be especially cautious.Today, information is readily available to consumers and with the prevalence of social media, bad news spreads fast. If you don’t know where all of your products are sourced from and who is making them, you could risk a PR nightmare that will lead customers directly to competitors.

Managing Supply Chain Risk

Although new technologies continually emerge that “revolutionize” the supply chain, not all technologies are alike. Businesses should focus on implementing and training their teams on demand planning tools that actually predict and manage volatility, not tools that give you point in time data or best estimate approximations.

How will you face so many uncertainties and potential challenges?  You certainly can’t control all external forces (political, natural disaster, energy costs, counterfeiting and others) but you can start by making supply chain risk management (SCRM) an integral part of your organization’s strategic planning process and redefining your internal practices and processes.  As you plan for the future and build on strengths, make sure you understand the risks and threats that could cause you to lose competitive advantage. All of your executives need to be involved in this process. In addition, you will need an emergency plan for new external or internal threats.

A proper SCRM plan is not about building fear in the organization, but about bringing peace of mind that your organization has taken the time to understand what is important and how to protect what is important should a crisis happens. This will ultimately make your organization stronger and ready to take advantage of situations that cause others to flounder.

Yves Belanger and Yves Leclerc are both members of West Monroe Partners. Belanger is a director and industrial engineer specializing in workforce optimization, Leclerc is a managing director and leads supply chain practice and Canadian offices.

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