PurchTips edition #411

Supply Chain Management is the planning, organizing, leading and controlling of the Procurement, Purchasing, Production, and Logistics Functions. In other words, it is the total set of activities ranging from the translation of customer requirements, selection of suppliers, acquisition of raw materials to conversion to finished products and services that are delivered to customers.

The modern supply chain is becoming increasingly dynamic, requiring increased awareness and capability by supply chain practitioners. Strong Strategic Systems Thinking, Environmental Scanning, Operational Execution and Continuous Improvement Acumen are core human capital assets needed to lead today’s supply chains.

The ability to protect one’s organization from risks underpins the skill set of the 21^st century supply chain manager. This acumen is enhanced by the mastery of Supply Chain Environments via the Science of Environmental Scanning. This entails understanding and influencing the socio-demographic, economic, market, technological, competitive, political, industry and ecological factors that impact organizations. The key is to examine, measure, understand, respond to and control trends that cause disruption to supply chain mechanisms.

The Top 10 Global Supply Chain Risks are:

1. Technology Factors caused by Big Data and Cyber Security concerns. Artificial Intelligence will pose a monumental risk to organizations that are slow to adjust.

2. Ecological Factors due to sustainability issues, uncontrolled emissions, global warming, and negative soil and water impacts

3. Political Factors caused by Trade Wars, military coups, and tribal conflicts that impact the supply of people and production process

4. Piracy Factors on land and sea routes is on the rise an threaten the reliable flow of goods. China, India and the United States are current engaged in an epic struggle with Somali Pirates on the high seas

5. Supply Chain Management Talent Factors have long been an issue. Many organizations lack the right talent to effectively lead the evolving modern supply chain.

6. Organizational Cultural Factors as many organizations are set in their ways and struggle to shift their mindsets to cope with the long list of rapidly developing supply chain issues

7. Economic Factors due to the colossal clash and exponential impact of the factors mentioned in the article.

8. Terrorism Factors continue to pose significant threats to the strategic assets that compose the globe’s vast set of supply chains. The war on terrorism is ongoing and while some areas are pacified others emerge into turmoil, threatening the collapse of critical supply chains as the theater is now global

9. Bull Whip Effect Factors due to lack of talent and understanding to effectively manage demand and supply dynamics. Very often unnecessary but significant resources are tied up in parts of a supply chain, tying up cash and increasing exposure to theft, damage, and obsolescence of products

10. Corruption Factors on the rise. Many nations that house critical and rare resources have rampant corruption, making them difficult and risky to do business in. Corruption includes human trafficking, bribery, and child abuse.

What should we do? Supply Chain Practitioners must be proactive in the following:

1. Measuring the Magnitude, Severity, and Degree of Occurrence of the Risk Factors in a timely and accurate manner. Look for Trends and Patterns in the data
2. Assessing their organizations’ current situation and ability to respond to threats posed from the risk factors
3. Formulating Strategies to effectively address these threats
4. Executing risk Mitigation Strategies and Tactics

Tools for Reducing Supply Chain Risk:

1. FMEA (Failure Mode and Effects Analysis) to understand, prioritize and improve existing risk, social responsibility and sustainability factors
2. Benchmarking of Best in Class Organizations and how they mitigate risk
3. Problem-Solving Methodologies, such as the DMAIC Model (Define, Measure, Analyze, Improve, Control) or PDCA (Plan, Do, Check, Act). Utilizing this talent to improve supply chain process and interactions with suppliers, internal and external customers is key.

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