At the start of 2009, as we wrote our supply chain top 10 predictions, it was already looking like the year was going to be one of continued economic trouble. Manufacturing companies we spoke to increasingly talked in terms of 'capital preservation' – not just cost savings, but driving assets (both physical plant and equipment and working capital) to higher levels of utilization and being more aware of business risks. Consequently, we included two predictions that related specifically to m
Through almost six months of 2009, we have seen evidence that both predictions are on target. Large supply chain 'brand owners' have increasingly invested in applications from small vendors like Aravo, Panjiva and CVN to help them to assess supplier risk. Further we are seeing large insurance underwriters like Marsh & McLennan offer more comprehensive 'supply failure' insurance to mitigate the financial effects of supply interruptions.
So, what is best-practice currently in managing risk in the supply chain, and how are companies organizing for risk management? In a prior report on risk management we had introduced the notion of a 'risk continuum'. Companies take very different approaches to risk. Some have a very sophisticated assessment and mitigation methodology and consider it a core competency in their overall supply chain management philosophy. Others may take very little action to either understand or mitigate against risk, particularly where the risk is either unknown, unlikely or unpredictable.
But what is organizational best-practice for managing risk? Is it to define a distinct risk management organization with a, dare I say, Chief Risk Officer, or is it to identifiy risk champions within the supply chain, but let the individual areas identify and mitigate risk according to their business priorities?
What do readers think?