A few things to consider when managing risk in a global supply chain

Have you ever bumped into someone you know when you’re on holiday or far from home? As we live in a global village, I’m sure this is something every supply chain pro knows all too well.

By and large, the supply chain is a global process, and managing risk is no easy task. At different stages of the chain you’ll come across differences in culture, language, values and organizational behavior. Working toward a common goal with different companies should be simple, but in truth, you often find that the interests and priorities of each company aren’t perfectly aligned with your own. Currency fluctuations and other economic shifts mean that a company in a different geography may alter its usual responses to changing supply and demand. Without the right approach, risks can pile up—and when you’re working on a global scale—this becomes even more sensitive.

Let’s rewind for a moment. If it’s such a risky situation, why do supply chain departments in companies operate globally? Cost savings may be the obvious answer, but these can be more elusive than you think. Dig a bit deeper and you may be able to anticipate increasing wages in developing markets, logistics costs increasing with the price of oil, travel costs and translation services.

Companies need the visibility and technology to maximize how much money they’re saving, but also focus on other contributing factors. Efficiency is one; visibility is another. Culture gaps are also a big one. Denmark and Belgium might only be an hour away from each other, but Belgian business practice is far more averse to risk. Denmark however, flourishes in a business environment that welcomes change and occasional uncertainty.

Dealing with these risks begins, as ever, with what we know. An experienced professional can produce a global supply chain plan that involves contingency time, money and resources. Back-up suppliers are lined up for those mission-critical parts.

However, we often don’t know what we don’t know (but wouldn’t life be simpler if we did?). Other types of risks are less likely to emerge, but they may have more dire consequences. The only sensible way of preparing for an unknown risk is to encourage a pragmatic culture from the offset. This requires a lot of resources and significant investment, but here are three key ways you can do this:

1)  Don’t rely on just one supplier

It’s likely Plan A will be close to home, with a long history of delivering results for your organization. Plan B might be a lower-cost but higher-risk supplier, or perhaps just a little too far from HQ to be used regularly. Either way, while you’re researching your supplier avenues, you may as well line a third one up if this is the first time you’re completing this project. I have heard of some peers completing projects with multiple suppliers for the same products, which can be another way of covering your back. That’s a suggestion that should only be made on a case-by-case basis though.

2)  Get to know your partners

No, I don’t mean take every new contact out for dinner. Spend the time necessary to understand the cultural and operational dynamics in countries that are new to you. Some cultures have solid and established networks of connections, trust and relationships, and this isn’t something you can ‘wing’. I mentioned earlier that despite working towards a largely common goal, not all companies involved in a supply chain will have a perfect alignment of priorities. Respecting and engaging in this cultural dynamic is critical to influencing where your project fits in with another company’s priorities.

3)  Use technical resources for detailed insight

My final piece of advice for mitigating risk in the global supply chain is to make sure you’re using the vast array of technological solutions to give you the best insights into every step of your processes. Having clear visibility at the click of a mouse or tap of a screen, can show you what parts of the supply chain are going well, what parts need some TLC and where the danger points lie. Being ‘present’ like this, allows you to minimize the impact of time, distance, communication and any other risks that might come with your exciting and rewarding global project.

Conclusion

I  read an article last week which revealed recent survey results, concluding that supply chain risk management has fallen out of the top ten priorities for companies for 2014 in their quest for business continuity. Those firms surveyed ranked supply chain risk at number 16, despite the ever-increasing complexitiy of today’s supply chains. The three tips for addressing supply chain risk mentioned above are theoretically plausible, but not always so easy to implement. That’s why it is intriguing for me to find out how today’s supply chain managers are mitigating supply chain risk in the real world. What tips do you have for addressing supply chain risk, and where would you rank this on a list of priorities for firms looking to ensure business continuity.