Aberdeen: Beating the Supply Chain Risk Drum
Earlier in the spring, before the current Aberdeen upheaval and Vance Checkett's move from the active roster to contractor status, Aberdeen issued a report on the current state of supplier performance and supply risk management (membership required). For anyone even mildly interested in supply risk management, I recommend at least spending some time with an abbreviated brief (registration, but no membership required) which highlights a cut of some of the analysis on supply risk, in particular.
If you'd like another good summary of the research, check out Supply and Demand Chain Executive's recent write-up of the report. In their article, SDCEXEC summarizes Aberdeen's findings, noting that Aberdeen "discovered that nearly 50% of enterprises lack formal metrics and procedures for assessing and managing supply risks. Simple disruptions in the supply chain can have ripple effects that last for years and cost millions of dollars so it is essential to know as much as possible about supplier performance. Best in Class enterprises know what to look for to manage supplier performance and risk, and more importantly, to anticipate potential problems."
In addition, "Two-thirds of companies expect supplier risks to increase in the next three years, and 60 percent of executives believe that supplier measurement and management programs can help mitigate top risk indicators such as financial viability, supply disruptions and supplier dependency."
Good stuff, but I believe it's important to assess all aspects of supply chain risk. As my wife and global sourcing diva Lisa Reisman recently pointed out in a China sourcing webinar last week, "political risk" is a huge factor. And not just the political risk of some armed nut like Hugo Chavez nationalizing his private sector, mind you. The ability of a cold, calculating government like the Chinese to change policy on a dime is also a political risk (especially when the US is whispering in it's ear). After all, raising export tariffs and reducing VAT rebates can have as great an impact on global sourcing decisions and prices as a decline in supplier quality or a supplier bankruptcy.
- Jason Busch
If you'd like another good summary of the research, check out Supply and Demand Chain Executive's recent write-up of the report. In their article, SDCEXEC summarizes Aberdeen's findings, noting that Aberdeen "discovered that nearly 50% of enterprises lack formal metrics and procedures for assessing and managing supply risks. Simple disruptions in the supply chain can have ripple effects that last for years and cost millions of dollars so it is essential to know as much as possible about supplier performance. Best in Class enterprises know what to look for to manage supplier performance and risk, and more importantly, to anticipate potential problems."
In addition, "Two-thirds of companies expect supplier risks to increase in the next three years, and 60 percent of executives believe that supplier measurement and management programs can help mitigate top risk indicators such as financial viability, supply disruptions and supplier dependency."
Good stuff, but I believe it's important to assess all aspects of supply chain risk. As my wife and global sourcing diva Lisa Reisman recently pointed out in a China sourcing webinar last week, "political risk" is a huge factor. And not just the political risk of some armed nut like Hugo Chavez nationalizing his private sector, mind you. The ability of a cold, calculating government like the Chinese to change policy on a dime is also a political risk (especially when the US is whispering in it's ear). After all, raising export tariffs and reducing VAT rebates can have as great an impact on global sourcing decisions and prices as a decline in supplier quality or a supplier bankruptcy.
- Jason Busch
51% of Companies Don't Understand Risk
http://blog.sourcinginnovation.com/2007/04/03/51-o...
But while we're on the subject of risks, and political risks, it's also worthwhile point out the Global Risks 2007 report by the World Economic Forum which summarized a slew of economic, environmental, geopolitical, societal, and technological risks that you need to be wary of in your Low Cost Country Sourcing and Global Sourcing efforts. I dedicated three posts to the report, one to the risks, one to the report's recommendations for mitigation, and, of course, one to my own set of mitigation recommendations:
http://blog.sourcinginnovation.com/2007/04/16/the-...
http://blog.sourcinginnovation.com/2007/04/17/the-...
http://blog.sourcinginnovation.com/2007/04/18/the-...
As for the Aberdeen Supply Risk Management report, readers can get a FREE copy of the report (registration required) at: http://www.procuri.com/knowledgecenter/whitepapers...
Now how's that for self promotion? ;)
Stay tuned!
But both Michael, and Tim, I assume ;-) ... nice work on the coverage as well. This is clearly a collective effort. There's no shameless self promotion if practitioners benefit in the end.