Are You A Gambler?

on Wednesday, June 11, 2008

Taking risk can be exciting. The rush of adrenaline and the thrill of winning gets more intense as the risk goes up. Or perhaps, the stress and anxiety increase and you have no fun at all. When it comes to your supply chain, are you a gambler?

Most companies have no formal risk assessment methodology or processes to mitigate risk in their supply chains. Many executives will agree that risk in their supply chain has increased in recent years, but few are taking any definitive action. Why? Are there a lot of gamblers in corporate America?

Quite often the attitude is "if it ain't broke, don't fix it". A lack of resources and short term goals force executives to focus on day to day operations and leaves little time for long range planning. Not knowing or not looking is equivalent to sticking your head in the sand. Your exposure may be far greater than you realize. Do you know where your suppliers get their raw materials and components from? What about your suppliers' suppliers? Are any of your suppliers having financial difficulty? Could they go out of business? What would a failure in your supply chain cost you?

Supply chain failure costs are far greater than most people realize. The impacts can be financial, loss of a key customer or customers, damage to company reputation, loss of competitive edge etc. Depending upon the degree of failure, the list can go on and on and may even result in the failure of the entire enterprise.

What can you do to reduce supply chain risk? Any plan should include the following elements: identify risks, develop strategy to mitigate risk, implement and monitor. Future posts will discuss each of these elements in more depth.

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