When professionals get together to discuss supply chains a new theme has begun to surface. Up until the last couple of years, the talk was mostly about how to align the supply chain with 'just in time' and 'minimal inventory' and 'lean manufacturing.' Companies were in a race to outsource at cheap Third World prices, China was on everybody's screen.

That's changed of late.

Now the hot topic seems to be supply chain resiliency. Without questioning the fundamentals of the global economy, there's heightened appreciation for what's at stake when an enterprise stretches out its supply chain.

This month's cover package, “Security on Steroids,” describes how 'best in class' companies are approaching supply chain risk. As Gail Dutton reports in “Plan B is Job One in Managing Supply Chain Risk,” the looming danger in the future will be less from terrorists (regardless of how much paranoia politicians stir up) than from a company's own suppliers. Why? Because, in reducing their number of suppliers for the sake of heightened collaboration and cost control, companies are very much vulnerable to the fortunes of those suppliers.

So long as suppliers are more-or-less fungible-providing 'stuff' that can be found multiple places-there's less invested in up-stream vendors. But once you start winnowing down your roster of sources in order to integrate them into your supply chain-engaging with them in collaborative processes, participating with them in strategic planning-they cease to be easily replaceable.

Knowing who you were doing business with was always important, but as wide-ranging supply chains become the backbone of the enterprise it becomes even more imperative. Indeed, what's new and different is the importance of your supplier's suppliers (and their suppliers)-the health of their business and business model-in sustaining your supply chain. Monitoring up-stream relationships is no longer restricted to one or two degrees of separation.

Real supply chain security is more than guns, guards and gates. It entails being able to co-exist within fast-changing networks of independent companies in different countries. Managing for your own interest now also includes managing for the robustness of those networks.



The World Economic Forum, the gilded 'who's who' of global business that so fashionably meets in Davos each year, recently released its annual study of global competitiveness. Americans will find the results unsettling. The U.S. now ranks sixth as the world's most competitive economy (preceded by No. 1 Switzerland, then Finland, Sweden, Denmark and Singapore).

Why so low? Because of mounting public debt and deficits, in no small part due to balance of trade imbalances. Although, the U.S. leads the world in innovation, patents and the collaboration between universities and industry, increasingly more and more government spending is going to debt service. Which means correspondingly less available to spend on infrastructure, schools and other investments that boost productivity. The effect of which is compounded by higher business borrowing costs as the heavy government borrowing competes with the private sector in financial markets.

Not a cheerful prognosis.