One of my professional volunteer activities includes a role as a roundtable officer for the New England Roundtable of the Council of Supply Chain Management Professionals (CSCMP). This morning I had the opportunity to attend our Supply Chain Executive Briefing breakfast session. This is an organized forum for a small select group of senior supply chain leaders to exchange perspectives on challenging issues. Today’s topic turned out to be very timely, Supply Chain Crisis Prevention and Preparation, especially in light of the recent devastating earthquake that occurred in Japan, with its associated impacts on industry supply chains. Congrats go to Greg Cornelius of Parexel and his planning team for assembling a great session.

The discussion leader was Bindiya Vakil, President and co-founder of Resilinc, a supply chain software and services firm for managing supply chain resiliency.  Bindiya has helped companies such as Cisco, Solectron and Broadcom design residency processes and she provided a thoughtful discussion on the elements, tools and analytics that make-up a meaningful risk mitigation program In light of the current events occurring in Japan, the discussion also afforded some timely reminders on how risk factors can be hidden without proactive analysis before the fact.

As I absorbed today’s discussion, I thought it would be helpful to share three thoughts for our readers to ponder regarding my takeaways from today’s interactive discussion:

Risk can existent not only in the most visible aspects of the supply chain, but also in the long-tail of supply chains.  The Japan related crisis is uncovering the risks associated in this long tail.  Bindiya provided very meaningful examples of how analysis at the lowest levels can uncover certain part dependencies or exposures to supply and revenue risk.  One thought that came to my mind was how many of today’s S&OP processes tend to dwell on planning demand and supply for higher level stock keeping units vs. some analysis for exposure at component level.

An often overlooked aspect of risk resides in the new product development process, and supply chain’s voice in that process. Engineers are often directed to utilize previous qualified or specified parts for new products, but how many of those same parts been analyzed for risk exposure?

Another critical aspect of risk and resiliency lies in the potential conflict of cross-organizational rewards and incentives. As one executive noted: “no pain- no change”.  While some sourcing and procurement teams have moved beyond piece-part dollar variance and supplier/material cost reduction as a sole metric, the notion of metrics for risk avoidance are sometimes difficult to practice.  The same for other cross-functional metrics and rewards that may over emphasize individual response to a crisis, vs. prevention of risk. Last September we penned a previous commentary, Supply Chain Risk Management and the Three Blind Mice, which should perhaps be updated and re-published twice a year.

The effects of the earthquake in Japan will ultimately uncover needs in supply chain crisis prevention and preparation.  Suffice it to state that this topic should be a discussion item for many supply chain organizations for many weeks to come.

Bob Ferrari

As an added note, we would  appreciate if readers would consider taking part in our one current question interactive poll on what impacts the earthquake in Japan is having on your particular supply chain. The poll can be found in the right-hand panel and you can review polling results thus far.