Now that you know how to identify potential points of failure, the probability of failure and the potential damage to your supply chain (see, you can start to take action to mitigate your risk. Pull together a cross functional team of your colleagues and review your supply chain map and supplier risk scorecard. Identify as many potential points of failure as possible and rank them as to potential impact on your operations. Start to identify actions that can reduce the impact of failure or likelihood that the failure will occur and actions that can be taken if the failure does occur.

Technology can be used to provide an "early warning system". RFID tags can be used to track inventory globally. ERP systems can be configured to provide you with alerts when anticipated events don't occur within the parameters that are established. The alerts can be sent to your cell phone or email. This will allow you to identify a problem in real time give you the opportunity to deploy your risk mitigation strategy.

Adding resources to the supply chain is another method to reduce risk and prevent failure. Resource strategies may include redundant systems, storing additional inventory at key locations in the supply chain, adding people to monitor and respond to supply chain conditions and using two or more suppliers for critical supply chain products or services. The associated costs of the resources added should be compared to the probability and cost of the potential failure.

A third strategy is to increase communications with your suppliers and gain greater visibility into their supply chains. Frequent supplier risk evaluations and dynamic updating of their scorecard will help you to identify the suppliers that are "at risk" for failure. Develop a work out plan with these suppliers. If you don't see rapid improvement, look for alternative sources of supply. Swift, effective actions are needed or things will not get any better. Suppliers that perform poorly will continue to fail unless definitive actions are taken.

Once you have developed and implemented your risk mitigation strategy........ monitor, monitor, monitor. When you see a blip on your early warning system, realize that things will get worse unless you act quickly. After the disruption is averted or corrected, conduct a detailed analysis of the causes and the related impact. Make adjustments to your supply chain to reduce the likelihood that a similar disruption can happen again. Continuous improvements will ensure that your supply chain is robust and keep you from "betting the farm".
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Steve Belli

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