October 2011 | How-To | Ten Tips

Protecting Your Supply Chain Against Disruption

Tags: Risk Management

Most companies know supply chain vulnerability poses a threat to their operations, yet few perform analysis or plan strategies to minimize risk to the bottom line. Businesses can protect against disruptions by adding supply chain redundancy, says Dr. Jeff Karrenbauer, president of supply chain solutions provider INSIGHT. Here is his advice for strengthening your logistics operations.

1. Perform a supply chain vulnerability audit. Start with your customers and the products they purchase, and work back to raw materials suppliers.

2. Do rigorous "what-if" analysis. Identify situations that could disrupt operations and develop contingencies to overcome these scenarios. Ask questions such as "What if we lose this supplier?" to create a strategic supply chain design that is optimally hardened against disruptions and serves as a cornerstone for a comprehensive business continuity plan.

3. Implement a strategic supply chain plan that mitigates the impact of disruptions. The trend toward lean inventory means many contemporary supply chains are "taut" or "brittle," and therefore vulnerable to disruptions. Reconsider inventory positioning, sourcing, and transportation options to create a more flexible supply chain.

4. Compare the cost of stockpiling inventory against the risk of losing sales and customers, and creating a negative impact on bottom-line profitability. Too much inventory at the wrong location adds to bottom-line costs. Determine optimal inventory policies and levels to sustain your company.

5. Make sure you have multiple transportation plans in place. Ruptured transportation means products and parts face delays in getting to customers. You can continue shipping products to customers—if you have alternative transport plans.

6. Update plans regularly. Factors such as new government regulations or suppliers can cause fluctuations in your company's vulnerability levels. It's vital to put in place consistent programs for updating your supply chain's resilience by reevaluating its design and instituting a corporate culture of security.

7. Create a balance between supply chain network efficiency and operations resilience. Take a holistic view of your supply chain to determine optimal network designs that ensure products are manufactured in the right location at the right time and will ship to the right customers.

8. Put alternative raw materials and manufacturing sourcing plans in place. Strategic planning ensures companies have alternative parts and supply sources, along with balanced inventory levels.

9. Develop mitigating strategies from the C-level. CFOs and others involved in corporate risk analysis and reporting need to take a realistic view of business risk from unimaginable real-world events, which have a very real probability of occurring.

10.Design long-term strategies as well as responses to short-term disruptions. These include critical location, customer, capacity, raw materials, and crisis response analysis.