Saturday, 27 July 2013

The Stages of Excellence in Supply Chain Risk Management

Dimension
Stage 1
Stage 2
Responsibility level
  • Functional or departmental skills
  • Business unit
Scope of risk
  • Market risks (foreign
  • exchange credit,
  • commodity)
  • Property or safety risk
  • IT security
  •  Market risk
  •  Property or safety risks
  •  Operational risk
  •  IT disruption
  •  Easily quantified risks
Risk-mitigation tools
  • Financial derivatives, property insurance
  •  Incident data and trend analysis
  • Supplier contract reviews
  • Self-assessment
Motivation
  • Financial derivatives, property insurance
  •  Avoid operational disruptions, avoid  costs of accidents
Updates to risk plan
  • Never
  • After major incidents
Supply chain
  •  Buffer inventories
  •  Excess capacity
  •  Alternative suppliers
  •  Recovery plans – select scenarios
Collaboration
  • Focus Internally
  • Communicate policies to suppliers
Dimension
Stage 3
Stage 4
Responsibility level
  • Corporate (chief risk officer
  • Extended enterprise (board level)
Scope of risk
  • All enterprise risks
  • Business continuity
  • Country risk
  • Key business processes
  • Day-to-day risks
  • Strategic risks
  • Operational resilience
  • Global business environment
  • Organisational or cultural component of risk management
Risk-mitigation tools
  • Contingency planning
  • Scenario analysis
  • New business and new venture audits
  • Risk adjusted performance measures
  • Advance warning systems
  • Back-up of processes as well as data
  • Quarterly drills that include key partners
Motivation
  • Protect brand image, maintain earnings stability
  • Create competitive advantage,  generate shareholder value
Updates to risk plan
  • Annually
  • Quarterly
Supply chain
  • Co-ordinate forecasts throughout supply chain
  • ‘What if’ modeling
  • Agility: products and processes
  • Supply chain transparency
  •  ‘War gaming’
  • Dynamic reserves of critical components 

Source: Supply Chains in a Vulnerable, Volatile World. Copyright A.T. Kearney, 2003

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