Getting a Grip on Multi-Tier Supply Chain Risk - A Resilinc Commentary
Today's commentary guest post is from Jon Bovit, Chief Marketing Officer of Resilinc, a provider of supply chain resiliency solutions for industries including high-tech, medical devices, and automotive manufacturers. SI recently covered Resilinc in detail in Do You Know What's At Risk? Resilinc Does! and Will Resilinc Resonate with Your Supply Chain.
Today's supply chains are complex, global, and highly dependent on sub-tier suppliers. Long term sustained success of companies is hugely dependent on the resiliency of their suppliers. Despite this, most supply chain leaders are unable to readily access critical supplier information necessary in order to manage business effectively. Supply chain leaders need a solution that maps the global supply chain across multiple tiers, identifies critical supply chain dependencies, exposes critical vulnerabilities and single points of failure, manages risk mitigation across the organization, and optimizes resiliency practices throughout the organization.
Despite popular opinion to the contrary, the harsh reality is that measuring supply chain risk at the supplier, or even the location, level is inadequate for today's global and complex supply chains. In order to properly managing supply chain risk, a company must start by mapping its global supply chain down to the individual products, parts, sites, and revenue across each of the multiple tiers. Once the multi-tier supply chain is mapped down to the product and part level, with the proper methodology, the company can calculate risk scores based on (multiple measures of) financial risk, location (economic and geopolitical) risk, and recovery risk (recovery time and BCP). By evaluating supply chain elements based on inherent financial, location and recovery risks (which align well with the risks identified in the recent World Economic Forum Global Risks report), supply chain practitioners can choose the most effective mitigation strategies.
As an example, by utilizing the above methodology, the Resilinc platform is able to quickly identify high risk, high revenue, single sourced parts for a high-revenue producing business unit. The high risk may come from long recovery times from a specific supplier manufacturing site in Malaysia or Japan. The customer can then come up with specific risk mitigations strategies for those specific high risk, high revenue single sourced parts before a disruption occurs, which could save the company millions in losses and unmeasurable damage to its brand. If risk was measured at the supplier level, these details would have been missed completely.
Customers should not only focus on assessing and mapping risks based on their supplier global footprint and site locations, but also should capture sub-contractor and sub-tier supplier dependencies, site activities, part origin, alternate sites, recovery times, emergency contacts, and business continuity planning (BCP) information. By focusing on identifying critical vulnerabilities and the highest risk exposures using quantitative scores and impact analysis at the product, part, and site level, leaders can direct limited budget and resources into the right areas for optimal protection against future supply chain disruptions.