Global supply-chain risk is increasing and becoming more costly to organizations. Just look at the ongoing ramifications of the horsemeat supply-chain debacle that galloped through Europe, harming the reputations and increasing the liability risks of supermarkets and frozen-food manufacturers.
According to Deloitte Consulting's 2013 Global Supply Chain Risk Survey, nearly half (48 percent) of polled executives said supply chain risk events are occurring more frequently and more than half (53 percent) said the events have become more costly over the past three years,
But the real surprise in the survey findings, said Kelly Marchese, principal with Deloitte Consulting LLP, was that 64 percent of the executives said their organizations had a risk management program focused on supply chains.
"I work in supply chains a lot and I have not seen evidence of that," she said. "The good news is 42 percent of them say those programs aren't effective so at least there is recognition that there definitely is a problem out there."
The most common and costly impacts cited by the executives are erosion of margins -- which are slim to begin with for so many organizations -- and an inability to keep up with sudden changes in demand.
Supply chains, Marchese said, are "more complex" than in the past. "It's harder to manage. It's harder to get your arms around and when you have [a disruption], it's harder to recover from, from a cost standpoint."
What makes it even more difficult is that sometimes ownership of a supply chain is outsourced to a supplier so the organization doesn't "directly control it and they don't know how a lot of the decisions around the supplier's supply chain and procurement have been made."
Too often, cost is driving decisions. Obviously, that needs to be a key factor, but organizations must also look at their vulnerabilities, resilience and risk tolerance, Marchese said.
If there is a disruption, does the organization need to resolve the issue within two hours, or is two weeks sufficient? And who in the organization owns the decision process?
"It's not just about responding to negative events," she said. "It's also about capitalizing on opportunities."
--By Anne Freedman
April 12, 2013
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