Supply Risk: Don't Ignore Network Design

I don't know about you, but it feels to me that the number of supply risk management articles and analyses has taken off in recent months. What was once a topic that was seldom discussed -- except, perhaps, by this blog, AMR Research, and a few others -- has now hit the mainstream. And it's about time. But the best news in all of this is the quality of ideas and information which are surfacing is almost uniformly excellent. It's as if consultants, vendors, practitioners and academics unleashed their supply risk gurus from their cages and allowed them to speak freely for the first time (that, or a number of individuals have gotten smart about the subject in a short period of time). One such analysis which deserves your attention comes from Anand Iyer, a fellow at i2 (a company, which, unfortunately, often gets short shrift these days due to concerns over vendor viability).

In a recent guest byline in Supply and Demand Chain Executive, Iyer tackles supply risk with a deft pen. While the subject matter in his piece is broader than just supply network design -- including potential demand volatility -- I found his particular comments in this area quite useful (in large part because they’re not talked about enough). According to Iyer, "Many of the factors that determine the risk affinity of a supply chain are established in the design stage ... From an operational standpoint, procurement risk management (PRM) begins with the design of the supply network ... Another well-known source of procurement risk is demand uncertainty. Demand uncertainties coupled with price volatility require supply chain organizations to identify and operate in a narrow zone that keeps at bay the triple threats of unmet demand, excess/obsolescence and unnecessary financial commitments ... [But] well-designed supply networks can increase the size of the operational safe zone by providing recourse to feasible alternatives." Sage words, but it's too bad that few companies evaluate supply risk and demand volatility as a key factor in network design and supplier selection.

- Jason Busch

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