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Managing Risk in the Supply Chain

By Vishal Sharma

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One of the toughest challenges in any supply chain is managing risk. Risks can be both internal and external, and they often create disconnects across the supply chain.

The trouble is this kind of “noise” is fairly common. Sudden changes in the demand patterns or customer requirements within the “frozen” horizon of an organization can make it difficult for a company’s internal processes to respond, thereby threatening the company’s ability to deliver against other commitments.

The risks that impact the design of an integrated supply chain can be separated into six distinct areas. Let’s look at those risks and then consider seven Golden Rules that can help any company achieve success.

Process Blueprint – Clear definitions or blueprints that describe the end-to-end processes can be elusive when companies fail to agree on the most efficient way to integrate the supply chain. Yet this is a critical step since the blueprint drives the execution of supply chain integration.

Process Idiosyncrasies – Unplanned rush orders are just one example of hiccups that cause supply chain idiosyncrasies. Your organization should be able to address exceptions concurrently and find a method for minimizing their impact on the supply chain.

Organizational Alignment – Often neglected, the "org chart" should reflect changes in a business’s supply chain. You probably have a missing link if your org chart doesn’t clearly indicate the point-person for supply management, demand management, sales and marketing, information systems, and product engineering.

Process Accountability – If you are going to upgrade your supply chain processes, you need to update the mechanism to measure success. Otherwise, you will be committing the same mistakes with newer tools and processes.

Data & Informational Overload – It goes without saying that if your organization can’t manage and use information effectively to respond to the customer, something’s broken. Data should be closely integrated with the transactional systems, because this very information is key to managing the business tactically and strategically.

Strategic Intent – This is defining and communicating the benefit or value to the customer. Too often during the design of integrated supply chain operations, companies neglect the key factor that influences the new environment—customer perceived value.

Companies like Cisco, Wal-Mart and Dell are classic examples of the integrated supply chain model because they keep the focus on strategic intent.

IT Management

So, some noise in the supply chain is inevitable. But that doesn’t mean sound IT management can’t bring these risk factors under better control.

Let me provide a set of rules for successful supply chain integration. The rules serve two purposes. Strategically, they ensure resources and IT investments are tied to business objectives and marketing. Tactically, they help integrate people, processes and technology and cut down on the communication snafus common to such projects.

Neoris’ Seven Golden Rules of Supply Chain Management

Create your competitive edge: Supply chain management is about being more efficient than your competitors in meeting your customers’ needs. Define the right architecture to establish a mix of 70% off-the-shelf and 30% tailored components that can give you this competitive edge.

Your horizon needs to be at least two levels down the supply chain: Consider your supplier’s suppliers; integrating only one level will not give you the visibility you need to succeed.

Integration is key: Developing a standard way for data integration to link all legacy systems is critical to successfully implement a supply chain management project. Systems need to be able to collaborate with each other. Today, most of them don't.

Establish a minimal set of KPIs (key performance indicators) first:They need to be aligned to your business drivers and customer needs. Your supply chain needs to be measured by those, and the information flow needs to support those KPIs.

Ensure a balanced supply chain: Automation and integration are great, but interpretation and decision making by human beings is still critical. Synchronizing demand and supply is more important than ever.

Your supply chain management platform needs to be flexible: Adding and removing partners and process components is an ongoing reality. This process must also be cost and time efficient.

SCM is also an internal change management issue: You need to break process silos within your organization and create collaborative communities.

The task of designing and deploying an integrated supply chain does not have to be a difficult undertaking. If planned correctly, the design should stem from creating real business value, focus on improved customer perception, and employ an incremental approach that makes it easier to adopt new processes.

Integrating the human elements and technology into the design will help smooth out most transitional stumbling blocks that organizations face. Create a process roadmap that addresses all these critical needs and provides a thoughtful and practical approach to supply chain integration.

Vishal Sharma is vice president of Supply Chain at Neoris, a global IT consultancy, systems integrator, custom application developer and leader in emergent technologies. Sharma has more than 15 years experience in IT consulting in the transportation, distribution, retail and consumer goods industries.