Ian Smith

London

4 min ∙ Reading Time ∙

What Steps Companies Can Take to Better Understand Risk Assessment...

It’s been said the journey of a thousand miles begins with the first step. In the world of supply chain management, the first step is assessing what the risk is and understanding how to mitigate it is the journey – the metaphorical destination is then supply chain resilience.

In this interview with Ian Smith, Director of Client Partnerships at mSE Solutions, Ian shares his thoughts on Dustin Burke’s recent TED talk, “How to fix broken supply chains” and what steps companies can take to better understand risk assessment and the benefits in both resilience and efficiency that can be realized through the application of digital business process innovations.

 

How can supply chains keep up with disruptions and challenges ranging from natural disasters to pandemics?

Supply chain challenges are not a new concept. As Dustin shared, the great toilet paper shortage of 1973 was because of a joke told by a late-night TV host, a direct link to panic buying. When we follow the journey of materials, manufacturers, finished goods, distributors, retailers and consumers, the complexity of supply chains are often where the biggest challenges, yet greatest opportunities occur. One example we saw during covid was pasta shortages. To mitigate the shortages manufacturers reduced choice. The reduction in SKU’s enabled higher production throughput through less changeovers, increasing capacity and supply. The consumer lost some choices, but they still had access to pasta.

 

How do risk focused analytics and solutions help companies gain greater supply chain efficiencies?

Many of the KPIs in use in supply chain are backward facing e.g. B/O value, demand v forecast, production v plant, OTIF etc. However, there is limited value in trailing indicators as a way of mitigating risk, you only know what happened, not why. Pivoting to leading indicators that give sufficient warning to enable timely reaction supports a more efficient response. Waiting until you have a stock shortage before acting typically increases costs through expediting efforts, premium shipment and executive headache! If you knew you may have supply issues 3 months in advance, you may have re-balanced your safety stocks or put demand restrictions in place. These analytics also let you dig deeper to understand why. Drivers such as tribal process and over reliance on technical solutions aren’t always obvious, but once they are understood, open the door to digital orchestration and integration of business processes.

 

How do companies begin to flip the idea of risk mitigation into an opportunity to do better business?

Those companies that actively manage their supply chain risk through collaboration, transparency and data analytics will be able to promote security of supply as a differentiator. At the C-level, emphasis put on supply chain predictability will drive behaviors that identify and mitigate disruptions delivering more predictive supply and reduced costs to customers.

 

How can companies build more resilient supply chains that will withstand crisis and disruption?

Going back to the example of reduced choice, identifying where your company becomes a single user of a material and building mitigation plans for that will go some way towards addressing the physical characteristics of risk. Having pre-prepared “plays” for specific supply scenarios can mitigate issues with transportation, as can strategically placed safety stocks. However, this is only part of the story; more efficient and more effective business processes are needed which collaborate across internal and external silos, leveraging digital technologies to predict and integrate disruptive events into supply chain planning. This will be the nirvana of risk mitigation.

 

What upcoming challenges do you see in the supply chain business landscape?

We won’t see exactly how businesses returns to normal for a while yet. The recovery appears to be driven geographically and politically. However, we must anticipate a fundamentally changed business landscape in the future. The supply chain disruptions of 2020 have created significant, and often unexpected challenges. From chip shortages driving car prices up to shortages of containers creating extended lead times for all types of products. Companies will need to improve their capabilities in three key areas: (almost) real time visibility into critical constraints, capabilities to model supply and demand scenarios, and elimination of tribal processes to enable flawless execution through process orchestration.

 

What does successful supply chain look like going forward?

The true innovators of supply chain management will be able to recognize the signals for impending disruptions, proactively mitigate interferences before they occur, and take advantage of the digital business solutions. When companies take the time to discover, orchestrate and automate untapped opportunities for business process digitalization, assessing risks will be the first step leading to digital business workflow integration e2e.