Chicka Chicka Boom Boom — Supply Risk and Coconut Trees

When it comes to supply risk, we often take for granted that if we can mitigate and manage supplier financial viability, we're more than doing our jobs. But holistically managing supply risk requires more than just scrutinizing your supplier's books. It also requires looking at supply risk up and down the supply chain, from our customers to, well, the tallest levels of our plan (literally). A humorous, but appropriate, example of this comes courtesy of India's Business Standard which recently pointed out a grave risk to the coconut industry supply chain -- a shortage of tree climbers.

According to the story, the Kerala region of India is "plagued by [a] declining number of coconut palm climbers" creating a risk to the "vital link in the production chain, with very few people taking on the traditional profession". The companies and region are going to great lengths to recruit potential climbers, even offering "free accident insurance" to those willing to risk life and limb scurrying their way up the coconut trees. While in the children's book that I'm sure many parents in the audience will know, all the letters end up crashing down after they make their way up to the top only to get back up again. I suspect in the real climbing world, it's hard to recover from such a fall. Which is an excellent metaphor for the dangers of supply chain risk in general.

If we fail to implement enough potential savings in a category -- or if some jokers in the business manage to circumvent our savings efforts -- it's one thing. But if by our action -- or by the actions of others -- the supply chain comes to a grinding halt for one reason or another, our businesses can face both foreseen and unseen consequences. For coconut growers, this can mean failing to harvest their crop 50% of the time, due to labor scarcity. But for the rest of us further up the supply chain, supply chain risks can bring lost revenue, depleted margins, brand erosion and capital markets risk -- even in the case of a single disruption. And to that, all I have to say is: Chicka Chicka Boom Boom -- look, we're digging our own risk tomb!

Jason Busch

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