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Concern about risk is generated by the usual suspects – hurricanes, floods, earthquakes, volcanic eruptions, labor strikes, political unrest and other factors. But there are less dramatic sources of risk to the supply chain that include changing customer expectations, volatility in pricing and product availability, uncertain financial conditions, regulatory and compliance obligations.
Add to this lengthening list a global trading environment that is more complex and dynamic than ever before, and the risk factor is multiplied. Today’s supply chains rely on thousands of independent suppliers and partners strung together across many countries. Many businesses simply don’t understand where and how they are vulnerable.
Ironically, some of the innovations that have led to dramatic improvement in the efficiency and cost effectiveness of supply chains have also heightened risk. Take, for example, the information and communications technology that makes it possible to track products and to manage distance. Customers and their logistics providers rely so heavily on that technology today that even a brief disruption in the flow of data and communications can prove catastrophic and costly.
Global sourcing has brought many advantages, but it has stretched the distance between producer and consumer. Lean manufacturing, just-in-time inventory, capacity rationalization and other practices intended to boost supply-chain efficiency have also sharply reduced the margin for error.
Given the wide range of possible risks, we are spending more time with customers identifying and discussing their vulnerabilities and devising strategies to protect their supply chains from disruption. In addition to true end-to-end visibility, tracking and communications, supply chain executives want help in managing purchase orders, consolidation and inventory. They’re looking to their logistics providers to handle their day-to-day interactions with suppliers and carriers, and they want our help with long-term planning and network optimization.
“What if” questions are daunting. It takes careful, thoughtful planning to come up with the right answers. But those who fail to ask “what if …?” put themselves at risk.