Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today’s installment covers a whitepaper from SAP entitled “Understanding and Managing Supply Chain Risk.”
The whitepaper begins by describing the benefits of “supply chain design.” I agree that, too often, our supply chains are essentially a hodgepodge of disparate suppliers, each selected independently of one another. It is beneficial to take a step back and evaluate the supply chain as a whole to identify opportunities for improvement of the supply chain for the sake of the supply chain, rather than on a category-by-category basis.
The whitepaper lists a few general risks that supply chain managers face:
- fluctuations of customer demand
- financial factors such as exchange rates and market pressures
- environmental and geopolitical factors such as weather, natural disasters,
political instability, and union action
It was here that I felt the whitepaper fell a little short of my expectations. Certainly, these factors that are external to suppliers can impact continuity of supply but, in my experience and observations, it is the factors that are internal to suppliers (e.g., capacity, management, quality, production flexibility, etc.) that are culprits for many interruptions in supply. The whitepaper didn’t really address these in sufficient detail. Not every production line shutdown at a buyer’s plant was the result of a hurricane, government regime change, or terrorist attack.
However, the whitepaper did a good job of redeeming itself by sharing some valuable methods of addressing risk, such as:
- Build a comprehensive model of the global supply chain, capturing business activities and key supply chain operations of primary partners, suppliers, and customers.
- Implement IT solutions that connect business data and processes from end to end, providing visibility into planned events, warnings for unexpected events, proactive exception management, and so forth.
- Use principles of continuous improvement with annual “supply chain drills” that test and scout for weaknesses, blind spots, and trouble areas in the extended supply chain.
All in all, this was a decent whitepaper, partly for its content and partly for its ability to get one thinking about the importance of supply chain risk management and what can be done today to maintain continuity of supply. You can download it here.
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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