Risk Factor: Supply Chain Management
During the 1990s, strategic heads at many of the US companies were quite satisfied with the way they have brought about change in the way supply chain management was carried out. They had turned the whole supply chain management exercise into an assembly line, with minimum inputs needed to keep the wheel turning.
In the last decade or two, the focus was on attaining cost efficiency by squeezing the last dollar from any mechanisms or processes. They procured components and inputs from the right places to the right places at the right times. The key was implementation of techniques and technologies at a robust pace; which included the lean production method introduced by W. Edwards Deming, just-in-time manufacturing, single-source suppliers, and global outsourcing.
However, recent events such as terrorist attacks and political instability in Third World countries—have brought to the fore the issues surrounding supply chain risks. World over supply chain managers believe some of the risks have evolved from or have been heightened by those who were aggressively pushing radical supply chain practices to cut costs.
According to industry experts, many of the primary risk have developed from a sustained pressure to improve productivity, eliminate waste and remove supply chain duplication. In cases these become competing priorities and it’s not always feasible to do away with the risks completely.
However, there are ways to mitigate risk - while still keeping the supply chain costs as low. First, however, a little background on the nature of risk and how companies seek to deal with it.
The types of risks are many and it is advisable to deal with all of them in a holistic manner, rather than in isolation. Risks to the efficient functioning of supply chain are many and the risks are present in the entire length of supply chains. The common and the most damaging risks include political instability, exchange rates fluctuations and changing customer demand.
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