My final post highlighting the recently completed Supply Chain North America Conference relates to an important milestone in the ability for supply chain professionals to measure supply chain risk. In the presentation Managing Risk in Your Organization with the SCOR Methodology, Dave Morrow, Managing Consultant at IBM, delivered an exciting overview for the initial introduction of supply chain risk management measures within the newly released SCOR Release 9.0 framework.This new supply chain risk management framework was the product of a global project team chaired by the Connecticut Center for Advanced Technology, Inc, and IBM, and a project team spanning 22 different organizations. The objective was to enhance the SCOR framework model to begin to incorporate a process to identify potential risk measures throughout the supply chain. By this writer’s view, this is a great start. Copies of the presentation and overview of this framework will be available to SCOR members shortly. (company membership in SCOR required)
This presentation provided what I believe to be one of the clearest definitions of what is supply chain risk management:
“Supply chain risk management is the systemic identification, assessment, and quantification of potential supply chain disruptions with the objective to control exposure to risk, or reduce its negative impact on supply chain performance”
The framework of measures includes a new Level 2 measure, Supply Chain Value at Risk, a category of risk metrics derived as an offshoot from the financial services industry value-at-risk, used to track market or portfolio risk. Twelve best practices are identified to identify formal risk management, provide quantification of risk, and categorize a supply chain designed for risk. Metrics utilize historical volatility as a risk metric, and will measure risk metrics for the Plan, Source, Make, and Deliver aspects of the SCOR framework.
Supply chain managers continue to seek more meaningful ways to communicate supply chain strategy needs with “C” level executives, and this new framework has the potential to allow these professionals to quantify to a CFO the value of supply chain factors of risk, as well as its impacts to demand and supply risks. I encourage readers to evaluate this new framework for potential use in measuring risk in your supply chain.