Executive Briefings

How to Build a Comprehensive Supply Chain Risk Management Strategy

Supply chain risk management is a major concern for many companies today. According to a Gartner IT Risk Management Survey, 70 percent of those canvassed said that risk management data would influence board-level decisions – up from just 46 percent a year earlier.

How to Build a Comprehensive Supply Chain Risk Management Strategy

Security is just one component of a risk management strategy. There is a wide array of considerations in any comprehensive risk mitigation plan.

While data loss and the threat of cyber-attacks are the most well-known security issues, there are three others on the minds of shipping and logistics professionals:

The lack of staff capable of using legacy technologies

Contingency plans for technology failures

The ability to scale as the result of M&A activity

Legacy Tech Hurdles

Millennials, who comprise a growing percentage of the workforce, are professionals accustomed to living their lives dependent on smart devices and accessing web technologies. So when they and other employees don’t, or can’t leverage legacy technology, then an organization’s clients could be at risk. 

Here’s how: The enterprise platform runs a business, but over time the legacy technology fails to keep up with industry-wide advancements. Concurrently, the legacy technology is inhibiting the recruitment and retention of the best and brightest. Companies realize they have a two-fold problem.

The premise may seem obvious, but employing people with the right skill sets saves an organization time and money. It also translates to a unified workforce committed to common business objectives.

On the other hand, the wrong skill sets mean mistakes, poor morale and, in turn, poor customer response times and customer service. Let’s face it, all employees impact clients at some level in today’s technology-driven business marketplace.  Even the IT department is asked to do more with less and prove itself as a strategic driver of a business organization’s game plan.

To fill the legacy tech talent gap, some organizations would do well to leverage managed services providers – especially as additional younger professionals join the workforce and older experts retire.

Managed services providers absorb the downside risks of technology talent gaps. As a result, organizations focus on what they do best and leverage their employees for high-functioning, strategic initiatives. 

Tech Breakdowns

An organization may deploy the most cutting-edge technology aligned with business objectives and have the most impressive IT departments. But technologies and systems do fail at some juncture.

Hardware failure is an important risk factor to consider – one, from my perspective, that can be as damaging as an external or internal hack. One has to ask, “What is my level of risk tolerance?” Depending on the answer, certain back-up hardware and disaster recovery scenarios come to the forefront. RTO, Recovery Time Objective, or RTS, Return to Service, are just some of the important measurements to consider.

Market research firm IDC released findings from a recent survey that spoke to the dire consequences of downtime. Seventy-one percent of U.S. businesses lost anywhere from $125,000 to $17m from just 10 hours of downtime per year.

System failures can have particularly huge implications for warehouses. Some can’t afford to experience downtime even for an hour.  In some industries, 10 minutes of downtime can equate to a $1m loss. For pharmaceutical distributors and food purveyors, downtime can mean the death of the organization. It also can impact human lives if the supply chain is disrupted.

For some organizations, though, the thought of duplicating systems on-site does not sit well with executives or the logistics professionals managing those systems on a daily basis. Again, that’s where it may make sense to seek outside help to manage such details on-premises, or outsourcing to a provider’s data centers.

Any strategy in this area should be designed with the assumption that negative events will occur; disaster recovery is the insurance policy around that disruption.

Moreover, while organizations can demand only so much from suppliers, they should require some level of redundancy to ensure operational consistency.  It’s important to have that discussion at the outset of a partner relationship – to determine which processes are business critical and cannot afford any downtime, and others that can afford some idleness.

The Need to Scale

Managing one’s own infrastructure is a formidable task. What happens when the organization is involved in a merger or acquisition? That’s where using an outside expert to host the hardware infrastructure, or to augment infrastructure at an organization’s site, becomes paramount. The ability to scale appropriately, even for a division addition or divestiture, can help the organization remain focused on core competencies and avoid the distractions that sometimes take businesses off track.

Granted, logistics professionals may not be happy about outsourcing infrastructure to deal with immediate pressures. After all, they are involved in a careful balancing act of risk vs. cost.

But these same forward-looking executives would not think twice about purchasing car insurance, health insurance and umbrella policies for themselves and their families. The same approach should hold true for the businesses they run.

Source: IBS

Security is just one component of a risk management strategy. There is a wide array of considerations in any comprehensive risk mitigation plan.

While data loss and the threat of cyber-attacks are the most well-known security issues, there are three others on the minds of shipping and logistics professionals:

The lack of staff capable of using legacy technologies

Contingency plans for technology failures

The ability to scale as the result of M&A activity

Legacy Tech Hurdles

Millennials, who comprise a growing percentage of the workforce, are professionals accustomed to living their lives dependent on smart devices and accessing web technologies. So when they and other employees don’t, or can’t leverage legacy technology, then an organization’s clients could be at risk. 

Here’s how: The enterprise platform runs a business, but over time the legacy technology fails to keep up with industry-wide advancements. Concurrently, the legacy technology is inhibiting the recruitment and retention of the best and brightest. Companies realize they have a two-fold problem.

The premise may seem obvious, but employing people with the right skill sets saves an organization time and money. It also translates to a unified workforce committed to common business objectives.

On the other hand, the wrong skill sets mean mistakes, poor morale and, in turn, poor customer response times and customer service. Let’s face it, all employees impact clients at some level in today’s technology-driven business marketplace.  Even the IT department is asked to do more with less and prove itself as a strategic driver of a business organization’s game plan.

To fill the legacy tech talent gap, some organizations would do well to leverage managed services providers – especially as additional younger professionals join the workforce and older experts retire.

Managed services providers absorb the downside risks of technology talent gaps. As a result, organizations focus on what they do best and leverage their employees for high-functioning, strategic initiatives. 

Tech Breakdowns

An organization may deploy the most cutting-edge technology aligned with business objectives and have the most impressive IT departments. But technologies and systems do fail at some juncture.

Hardware failure is an important risk factor to consider – one, from my perspective, that can be as damaging as an external or internal hack. One has to ask, “What is my level of risk tolerance?” Depending on the answer, certain back-up hardware and disaster recovery scenarios come to the forefront. RTO, Recovery Time Objective, or RTS, Return to Service, are just some of the important measurements to consider.

Market research firm IDC released findings from a recent survey that spoke to the dire consequences of downtime. Seventy-one percent of U.S. businesses lost anywhere from $125,000 to $17m from just 10 hours of downtime per year.

System failures can have particularly huge implications for warehouses. Some can’t afford to experience downtime even for an hour.  In some industries, 10 minutes of downtime can equate to a $1m loss. For pharmaceutical distributors and food purveyors, downtime can mean the death of the organization. It also can impact human lives if the supply chain is disrupted.

For some organizations, though, the thought of duplicating systems on-site does not sit well with executives or the logistics professionals managing those systems on a daily basis. Again, that’s where it may make sense to seek outside help to manage such details on-premises, or outsourcing to a provider’s data centers.

Any strategy in this area should be designed with the assumption that negative events will occur; disaster recovery is the insurance policy around that disruption.

Moreover, while organizations can demand only so much from suppliers, they should require some level of redundancy to ensure operational consistency.  It’s important to have that discussion at the outset of a partner relationship – to determine which processes are business critical and cannot afford any downtime, and others that can afford some idleness.

The Need to Scale

Managing one’s own infrastructure is a formidable task. What happens when the organization is involved in a merger or acquisition? That’s where using an outside expert to host the hardware infrastructure, or to augment infrastructure at an organization’s site, becomes paramount. The ability to scale appropriately, even for a division addition or divestiture, can help the organization remain focused on core competencies and avoid the distractions that sometimes take businesses off track.

Granted, logistics professionals may not be happy about outsourcing infrastructure to deal with immediate pressures. After all, they are involved in a careful balancing act of risk vs. cost.

But these same forward-looking executives would not think twice about purchasing car insurance, health insurance and umbrella policies for themselves and their families. The same approach should hold true for the businesses they run.

Source: IBS

How to Build a Comprehensive Supply Chain Risk Management Strategy