Executive Briefings

Preparing for Risks and Disruptions

Analyst Insight: While the global economy continues to remain sluggish, there is still a rising demand for new products, sources and markets. Nearly all multinational corporations (MNCs) have learned more about globalization and the risks and rewards that come with it. But MNCs and middle market companies still struggle with supply chain disruptions, higher costs of logistics, and issues caused by longer lead times. Supply chain managers have to plan and execute better globally. At the same time, more effective strategies and methods are evolving to overcome these challenges and achieve profitable growth. - Gene Tyndall, EVP Global Solutions, Tompkins International

It is clear that very few companies are satisfied with their global supply chain operations despite their growing business dependence on strategic global sourcing and global product distribution. Concerns of increased risks, supply chain disruptions, higher costs of energy and logistics, and capital efficiency are in the forefront. These concerns heightened in 2011 and will continue on the agenda for 2012.

A recent survey by the Business Continuity Institute revealed some troubling facts. Among these were: (1) more than 50 percent of companies cite weather as the top supply chain disruption; (2) supply chain incidents lead to financial "hits" (e.g., loss in productivity, higher costs, and lost revenues); and (3) these "hits" are doubled in size when supply chains are not "resilient."

Obviously the weather cannot be controlled, but the severity of its adverse effects on companies can be minimized. Supply chain resiliency is derived from effective planning and smart execution. From a global supply chain planning perspective, organizations can plan for contingencies as well as for an alternative flow of goods. They can prepare by challenging logistics networks more proactively and establishing alternate plans for the routing of goods.

Predictability sets standards, but "one solution" can no longer be applied to global supply chains with potential disruptions (e.g., adverse weather, labor actions, demand and supply volatility, terrorism, and political unrest) looming.

On the execution side, with effective planning around several scenarios, there are some feasible options to employ. However, few "war plans" ever hold up in battle, so it is unrealistic to expect that supply chain plans can respond to every surprise in the global environment.

What actions can be taken to execute in the middle of a crisis?

1.   Work closely with trading partners - suppliers, service providers, and customers - to reach acceptable solutions for everyone involved.

2.   Leave the "war room" (command and control center) and devise alternatives.

3.   Rely on the new tools for analyzing supply chains and options for tracking and tracing goods from end to end, and for rapid responses.

Not all global supply chain management issues are risk-based or disruption-based, but these get all the attention from the executive suite. It is up to global supply chain managers to not only be prepared for the negative events but also to adopt continuous improvement strategies for their supply chains. There is no room for complacency in planning and managing worldwide supply chains.

                                       The Outlook

In 2012, more global supply chain managers will have to raise their knowledge and capabilities in all the mega processes: plan, buy, make, move, store and sell.  All the processes come into play when products are positioned for sale - whether through retailers, e-commerce, distributors, or internet fulfillment. Supply chain managers are finally getting the executive support needed, but with this support comes responsibilities. Leading practices, new solutions, and innovations are being learned every day. It is crucial to keep informed on what is new and what works best for your company.

It is clear that very few companies are satisfied with their global supply chain operations despite their growing business dependence on strategic global sourcing and global product distribution. Concerns of increased risks, supply chain disruptions, higher costs of energy and logistics, and capital efficiency are in the forefront. These concerns heightened in 2011 and will continue on the agenda for 2012.

A recent survey by the Business Continuity Institute revealed some troubling facts. Among these were: (1) more than 50 percent of companies cite weather as the top supply chain disruption; (2) supply chain incidents lead to financial "hits" (e.g., loss in productivity, higher costs, and lost revenues); and (3) these "hits" are doubled in size when supply chains are not "resilient."

Obviously the weather cannot be controlled, but the severity of its adverse effects on companies can be minimized. Supply chain resiliency is derived from effective planning and smart execution. From a global supply chain planning perspective, organizations can plan for contingencies as well as for an alternative flow of goods. They can prepare by challenging logistics networks more proactively and establishing alternate plans for the routing of goods.

Predictability sets standards, but "one solution" can no longer be applied to global supply chains with potential disruptions (e.g., adverse weather, labor actions, demand and supply volatility, terrorism, and political unrest) looming.

On the execution side, with effective planning around several scenarios, there are some feasible options to employ. However, few "war plans" ever hold up in battle, so it is unrealistic to expect that supply chain plans can respond to every surprise in the global environment.

What actions can be taken to execute in the middle of a crisis?

1.   Work closely with trading partners - suppliers, service providers, and customers - to reach acceptable solutions for everyone involved.

2.   Leave the "war room" (command and control center) and devise alternatives.

3.   Rely on the new tools for analyzing supply chains and options for tracking and tracing goods from end to end, and for rapid responses.

Not all global supply chain management issues are risk-based or disruption-based, but these get all the attention from the executive suite. It is up to global supply chain managers to not only be prepared for the negative events but also to adopt continuous improvement strategies for their supply chains. There is no room for complacency in planning and managing worldwide supply chains.

                                       The Outlook

In 2012, more global supply chain managers will have to raise their knowledge and capabilities in all the mega processes: plan, buy, make, move, store and sell.  All the processes come into play when products are positioned for sale - whether through retailers, e-commerce, distributors, or internet fulfillment. Supply chain managers are finally getting the executive support needed, but with this support comes responsibilities. Leading practices, new solutions, and innovations are being learned every day. It is crucial to keep informed on what is new and what works best for your company.