Five Steps Best for Managing Supply Risk

The steps taken not only reduced supply chain disruptions, they helped with overall delivery, cycle time and quality performance. The steps were discerned and defined in a study by Aberdeen Group, sponsored by Austin-Tetra, Inc.

With more than 80% of the supply management executives at the 180 global enterprises surveyed in "Supply Risk Management Benchmark: Maintaining Continuity and Mitigating Risks in an Uncertain Global Economy " reporting disruptions over the past two years, results were negative impact on customer relations, earning, time-to-market cycles, sales and overall brand perception.

The five approaches used by companies that performed best in their supply risk management programs were:

1. Defining and enforcing standard performance and risk measures and assessments.

2. Making risk management a core and repeatable business discipline.

3. Adopting sourcing methods to balance costs, performance and risks.

4. Leveraging technologies and information services to improve risk planning, monitoring and response.

5. Development and collaboration with suppliers to detect and mitigate risks.

The study also found that because of instability in the supply market, new regulatory requirements, the possibility of natural disasters and terrorist attacks more than 75% of executives surveyed expect supply risks to grow over the next three years.

“Years of cost-cutting and lean operating practices have made businesses more vulnerable to supply disruptions than ever before,” notes the study’s author, Tim Minahan, senior vice president of supply research and strategy at Aberdeen. “Pressures for business continuity and regulatory compliance will force companies to make supply risk management a core business.”

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