When it comes to manufacturing a product, there is a certain level of risk that is impossible to avoid. No matter how much planning you do, something will eventually come along that takes your organization completely by surprise—whether it’s an earthquake, a major part recall or an irresolvable conflict with your CM. But in spite of your inability to control everything, it’s good to continually scan the horizon for strategies that will help you be better prepared for a worst-case-scenario.
As I mentioned in a previous post, it seems that some manufacturers are making calculated decisions not to invest in risk mitigation, believing that cleanup is a more manageable cost than prevention. Other organizations want to invest in risk management, but lack the time, resources and know-how to do so.
For those that are looking to adopt risk management strategies in 2011, here are some considerations from JDA Software that I found particularly useful for both manufacturers and retailers, as well as links to a few other articles I found particularly relevant.
And if you have a favorite article or go-to-resource for supply chain risk management, please share it in the comments.
When creating a plan for minimizing supply chain risk...
- Make sure your supply chain risk management strategy allows for frequent plan updates—you never know when political conditions, tariffs, labor costs and other factors may change.
- Create contingency plans by mapping out “what-if” scenarios and running business simulations to assess the potential impact of a disaster.
- Make sure your backup production and distribution plans include 2-3 different options for sourcing materials, components and vendors.
- Clearly communicate your risk management strategy to operational and tactical employees. Running “what-if” scenarios in advance at the tactical level can help reduce the business impact of a supply shortage.
- Monitor and understand daily operating conditions so you can anticipate regular spikes in demand, seasonal weather patterns such as droughts, hurricanes, tornadoes and floods, and short-term performance threats as much as possible.
- In times of crisis, monitor supply chain activity and make sure your promotional teams are prepared to adapt campaigns as product availability changes.