Executive Briefings

Supply Chain Risk Awareness, Assessment & Benchmarking

Analyst Insight: In 2010, as we began to offer a supply chain risk management class at Lehigh, our body of knowledge continued to expand and migrated into a very effective methodology to review, evaluate and benchmark a company's end-to-end supply chain maturity and inherent risk. The methodology encompassed 100 questions-of-discovery across 10 tenets of the supply chain resulting in a Red, Yellow & Green "spider diagram" profile of a company's supply chain maturity and inherent risk. – Gregory L. Schlegel, Founder, The Supply Chain Risk Management Consortium, and Adjunct Professor, Supply Chain Risk Management, Lehigh University

Supply Chain Risk Awareness, Assessment & Benchmarking

This new "Heat Map" approach provides companies, perhaps for the first time, a glimpse into their risks within their entire supply chain. After about 15 years of global supply chain consulting and university supply chain courseware, we felt very comfortable devising a very visual approach to begin the supply chain risk dialogue. The major tenets of the Assessment Tool are - Leadership, Balanced Scorecards, S&OP, IT Systems, Supply Chain Techniques, Demand/Customer Management, Industry Practices, Manufacturing Methods, Supply Base and Logistics. The typical outcomes from the use of this novel Risk Assessment Tool are below.

Awareness—This was the initial impetus behind developing a visual mechanism in an effort to get the supply chain risk dialogue started. We found through our research that almost no one overtly talks about supply chain risks within the operations, supply chain or even the sales and operations planning process. With as many as 20 percent of companies who experience a supply chain disruption going out of business within 18 months, we were compelled to develop a quick-hit methodology to get that dialogue out in the open.

Assessment—This outcome manifests itself in two very important ways. First, the Questions-of-Discovery are a “perception-based” assessment of a company’s as-is approach within their supply chain, relative to best practices. It profiles how a company is positioned in terms of the 3 P's – People, Processes and Programs (IT Systems). Second, it visually provides a glimpse into the inherent risks within the company’s supply chain. This in turn provides a baseline for education in order to mitigate and manage the risks.

Node-by-Node Risk Mapping—Generally, after the initial dialogue of risk awareness and assessment, many organizations dig deeper into their complex supply chains, by node or facility, to understand root causes driving risk, answering the questions of what, why, where and how do we mitigate those risks. Many organizations are digitizing their complex supply chains, graphically mapping those supply chains, by node and superimposing risk assessments between each node, with Risk Gradients of Red, Yellow and Green. Ultimately they then turn the Red lines into Yellow and Yellow to Green with new tools, techniques and tactics.

Risk Benchmarking—And finally, companies are utilizing the Risk Assessment Methodology after developing and exercising supply chain risk mitigation projects. These companies re-evaluate their supply chain maturity and risk once again, demonstrating still another value-added aspect of the tool by utilizing it to objectively demonstrate their supply chain maturity growth and subsequent risk mitigation success.

The Outlook

From our Discipline Adoption Curve work we've come to the conclusion that about 10 percent of companies are early adopters – actually exercising good SCRM practices. About 20 percent more are talking about and developing good SCRM practices and the bulk of the company population, or 70 percent, are reacting to supply chain risks as an ad-hoc, event-driven approach. We have a lot more work to do to help companies effectively identify, assess, mitigate and manage supply chain risk.

This new "Heat Map" approach provides companies, perhaps for the first time, a glimpse into their risks within their entire supply chain. After about 15 years of global supply chain consulting and university supply chain courseware, we felt very comfortable devising a very visual approach to begin the supply chain risk dialogue. The major tenets of the Assessment Tool are - Leadership, Balanced Scorecards, S&OP, IT Systems, Supply Chain Techniques, Demand/Customer Management, Industry Practices, Manufacturing Methods, Supply Base and Logistics. The typical outcomes from the use of this novel Risk Assessment Tool are below.

Awareness—This was the initial impetus behind developing a visual mechanism in an effort to get the supply chain risk dialogue started. We found through our research that almost no one overtly talks about supply chain risks within the operations, supply chain or even the sales and operations planning process. With as many as 20 percent of companies who experience a supply chain disruption going out of business within 18 months, we were compelled to develop a quick-hit methodology to get that dialogue out in the open.

Assessment—This outcome manifests itself in two very important ways. First, the Questions-of-Discovery are a “perception-based” assessment of a company’s as-is approach within their supply chain, relative to best practices. It profiles how a company is positioned in terms of the 3 P's – People, Processes and Programs (IT Systems). Second, it visually provides a glimpse into the inherent risks within the company’s supply chain. This in turn provides a baseline for education in order to mitigate and manage the risks.

Node-by-Node Risk Mapping—Generally, after the initial dialogue of risk awareness and assessment, many organizations dig deeper into their complex supply chains, by node or facility, to understand root causes driving risk, answering the questions of what, why, where and how do we mitigate those risks. Many organizations are digitizing their complex supply chains, graphically mapping those supply chains, by node and superimposing risk assessments between each node, with Risk Gradients of Red, Yellow and Green. Ultimately they then turn the Red lines into Yellow and Yellow to Green with new tools, techniques and tactics.

Risk Benchmarking—And finally, companies are utilizing the Risk Assessment Methodology after developing and exercising supply chain risk mitigation projects. These companies re-evaluate their supply chain maturity and risk once again, demonstrating still another value-added aspect of the tool by utilizing it to objectively demonstrate their supply chain maturity growth and subsequent risk mitigation success.

The Outlook

From our Discipline Adoption Curve work we've come to the conclusion that about 10 percent of companies are early adopters – actually exercising good SCRM practices. About 20 percent more are talking about and developing good SCRM practices and the bulk of the company population, or 70 percent, are reacting to supply chain risks as an ad-hoc, event-driven approach. We have a lot more work to do to help companies effectively identify, assess, mitigate and manage supply chain risk.

Supply Chain Risk Awareness, Assessment & Benchmarking