Executive Briefings

Risk Management Comes to the Forefront of Supply Chain Management Strategy, According to New IBM Study

"Faster, cheaper, better"-that has been the mantra of supply chain managers for some time now. But a new study of 400 chief supply chain officers by IBM finds that risk management has become an equally important consideration. The growing complexity of fulfillment processes, caused in large part by companies' heavy reliance on offshore suppliers and contract manufacturers, has executives worried about all of the additional things that can go wrong. Many of those glitches can have a serious impact on corporate bottom lines, business partnerships, customer relationships and even consumer health.

Respondents to the IBM survey cite recent headlines, such as the salmonella-tainted peanut butter which caused nine deaths and made hundreds ill earlier this year, and the deadly contamination of infant formula in China last fall. Such scenarios have prompted executives to take a fresh look at risk management, IBM says. What's needed, the respondents say, is better visibility of data, coupled with more flexibility in the way risk is managed. "A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence," says Sanjeev Nagrath, global leader of supply chain management with IBM Global Business Services. "As supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."

The IBM report calls for a supply chain that is "thoroughly instrumented, interconnected and intelligent." Such a system would combine human expertise with technological prowess, making the most of data flowing from sensors, radio frequency identification tags, meters, GPS tracking and other machine-based sources. In this utopian world, "the entire supply chain will be connected-not just among customers, suppliers and IT systems in general, but also parts, products and other smart objects used to monitor events within the supply chain."

Of course, supply chain managers must address some more fundamental issues before that dream can come true. Number one among executives' concerns, according to the IBM report, is still the inability of most companies to make sense of a mass of fragmented data. Only 16 percent of respondents said they were doing a good job at integrating critical information across the supply chain with external partners. The rest continue to be plagued by blind spots.

Visit www.ibm.com/supplychainstudy

"Faster, cheaper, better"-that has been the mantra of supply chain managers for some time now. But a new study of 400 chief supply chain officers by IBM finds that risk management has become an equally important consideration. The growing complexity of fulfillment processes, caused in large part by companies' heavy reliance on offshore suppliers and contract manufacturers, has executives worried about all of the additional things that can go wrong. Many of those glitches can have a serious impact on corporate bottom lines, business partnerships, customer relationships and even consumer health.

Respondents to the IBM survey cite recent headlines, such as the salmonella-tainted peanut butter which caused nine deaths and made hundreds ill earlier this year, and the deadly contamination of infant formula in China last fall. Such scenarios have prompted executives to take a fresh look at risk management, IBM says. What's needed, the respondents say, is better visibility of data, coupled with more flexibility in the way risk is managed. "A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence," says Sanjeev Nagrath, global leader of supply chain management with IBM Global Business Services. "As supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."

The IBM report calls for a supply chain that is "thoroughly instrumented, interconnected and intelligent." Such a system would combine human expertise with technological prowess, making the most of data flowing from sensors, radio frequency identification tags, meters, GPS tracking and other machine-based sources. In this utopian world, "the entire supply chain will be connected-not just among customers, suppliers and IT systems in general, but also parts, products and other smart objects used to monitor events within the supply chain."

Of course, supply chain managers must address some more fundamental issues before that dream can come true. Number one among executives' concerns, according to the IBM report, is still the inability of most companies to make sense of a mass of fragmented data. Only 16 percent of respondents said they were doing a good job at integrating critical information across the supply chain with external partners. The rest continue to be plagued by blind spots.

Visit www.ibm.com/supplychainstudy