- Although 40% of companies do not analyze the cause of their supply chain disruptions within their supply chains, every company should, Strategic Sourceror reported Tuesday.
- The first step to breaking the habit is understanding why companies do not analyze these disruptions. Valuing probability over possibility is one reason, as the unlikelihood of disruptions can lead to a false sense of security. Often, however, companies are simply unaware of the degree of risk they face.
- One vital step to risk protection is to ensure IT continuity and security, as doing so will better guard intellectual property, increase agility and improve the availability of actionable systems information.
Risk management is often considered the Achilles' heel of a supply chain manager: logistics could be perfectly coordinated, sites well-selected, partners well screened, and even so, a faraway weather catastrophe (to cite the most frequent disruption) may upturn the entire chain.
Part reality, part problem, this philosophy encourages managers to consider risk in financial terms. Why invest in risk management programs if the unpredictable will occur, anyway? It's difficult to quantify the null factor that is risk, so instead of considering risk a pure cost, managers must quantify it in terms of an opportunity to retain sales that could be lost when, rather than if, a disruption occurs.
Such a shift in thought will help managers transition from risk management to resilience building. In other words, rather than preparing to react to invisible threats, building an agile chain that will minimize loss. Risk management and resilience building are just different ways of addressing the same goal.
Resilience requires understand when, why and how disruption happens, though, so root inefficiencies can be permanently corrected. Meanwhile, avoiding the problem could bring greater disruptions at a later date.