Balancing Supply Chain Risk and Performance

Maximizing supply chain performance at the lowest operating costs and the lowest inventory levels means eliminating duplication of facilities and redundancy of vehicles and routes. It means reducing safety stock and work-in-process inventory at facilities.

But elimination of duplicate facilities and redundancy of routes and reducing on-hand inventory often means an increase in risk. The very elimination of duplication and redundancy needed to create cost efficient supply chains also tends to increase the numbers and the effects of supply chain points of failure. This is because the lack of redundancy limits the options for responding to unexpected supply chain disruptions.

In your supply chain model, efficiency needs to be carefully balanced with responsiveness in order to properly manage risk in the environments where your supply chain operates. And the balance between the two is always evolving.

EFFICIENCY VERSUS RESPONSIVENESS

The more stable and predictable the product demand and production environment is, the more a supply chain design can focus on EFFICIENCY and LOW COST.

The more volatile and uncertain the product demand and production environment is, the more a supply chain design needs to focus on RESPONSIVENESS and RISK REDUCTION.

Many supply chains now operate in volatile, uncertain, complex and ambiguous environments. In such environments, risk assessment and creation of appropriate supply chain contingency plans is an on-going process, not a one-time or annual event. This risk assessment and planning process is illustrated in the four steps shown below.

Risk Assess & Planning

The best risk assessment and planning comes from cross-functional teams who can look at supply chains from different perspectives such as operations, finance, procurement and technology. SCM Globe provides a common platform for many different people to participate in the creation and review of supply chain contingency plans. See the case study titled “Java Furniture Company – Indonesia” for an example of how this risk management process can work.

SCM Globe enables risk management teams to model company supply chains and run simulations to identify likely points of failure and risk. They then create contingency plans and new supply chain models to be used in the event of those supply chain disruptions.

These supply chain models and simulations clearly illustrate the team’s risk assessments and recommendations. These models and simulations can easily be shared with and reviewed by a wider audience of people who can examine proposed supply chain models and see for themselves what happens in the simulations. And they can also experiment with their own ideas and share them in this review process.

In this way, supply chain models are continuously evolving as supply chain risks evolve. And contingency plans benefit from the input of a wide group of people with relevant and valuable experience.

SUPPLY CHAIN MODELING AND RISK ASSESSMENT SERVICES

Advanced supply chain modeling and risk assessment services are provided by SCM Globe consulting partners. Find out more by inquiring at info@scmglobe.com

 

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