the procurement viewpoint Risk Management
Are There Hidden Risks in
Your Supply Chain?
By Tim Albinson
upply chain risk is one of the most visible challenges that • Issues with production and safety standards
S companies face today. Recent headlines tell the story: delayed
product introductions, natural disasters such as earthquakes
(leading to factory shutdowns and logistics delays), tainted consumer
These factors all can create massive exposure. Even Wal-Mart,
a company that many consider to be one of the more advanced
organizations when it comes to monitoring and managing their
and pharmaceutical products, child labor abuses, manufacturing and supply chain, has faced criticism from the federal government thanks
logistics disruptions – the list goes on. to the practices of some of its suppliers.
Similar to medical conditions like smoking and obesity, supply
chain risk can lead to catastrophic damage if left untreated. The A Solution to Reducing Supply Risk
good news when it comes to supply chain risk is that it is, in fact, a Just as doctors diagnose patients, companies must do the same
highly treatable condition. Perhaps most important, supply chain risk when it comes to their supply chains, pinpointing the many areas
is something that companies should manage before a catastrophic of vulnerability they face. Then it comes time to prioritize risk
event occurs – not after. Yet many companies do not consider their management initiatives and chart a course of action.
options – adjusting their practices accordingly – until it’s too late. When most companies think about pursuing supply risk reduction
initiatives, they immediately think about the best known form of
supply risk – supplier financial viability. Without question, it’s
essential to create risk mitigation and management plans that take
into account the potential of suppliers becoming insolvent.
But in order to achieve true risk management and mitigation a
number of elements go into a successful risk management program.
These areas include:
• Tracking supplier credentials and certifications
• Monitoring for local regulatory compliance
• Green/sustainability practices
• Driving supplier codes of