Wiping the Volcanic Supply Chain Risk Ash off AT Kearney's Supply Risk Research (Part 1)

Even though I think Paul Laudicina, AT Kearney's chairman, is a bit misguided when it comes to politics and economics -- his address at ISM's annual event last year could have been a stump speech for Obama's CSR and finance priorities -- his recent online column in Forbes makes a good effort at sharing some of the supply chain risk implications of the recent explosion of that unpronounceable volcano. Laudicina does a solid job of summing up the supply implications of the event when he notes that "Businesses of all types were affected, from fine dining restaurants in Asia that were unable to receive their foie gras shipments from Paris, to the recipients of U.S.-bound contracts stuck on grounded FedEx planes at Heathrow." Editors note: the fois gras reference certainly has nothing to do with AT Kearney meal expense submissions to clients.

Moreover, the event also impacted AT Kearney executives and consultants, who had to wait for their cross-Atlantic business class tickets to take flight until airports reopened (yet another good excuse to stay another night in a swanky hotel on the client and find the closest Michelin one or two star ode to gastronomy, I say, speaking from past consulting experiences from my youth). Yet the more serious implications of the event -- and AT Kearney's research on supply risk -- suggest that companies have their hands full tackling supply risk on multiple fronts that are potentially far more costly than having a strategy and operations consulting team practicing a land and expand strategy in their HQs.

AT Kearney's benchmarks in the area suggest company executives are fighting multiple fires on the supply risk front. According to their recent research, 43% of survey respondents cited volatile commodity prices as an area of concern when it comes to supply risk. This was followed by "credit or currency risk in sourcing countries" (37%), rising fuel costs (36%), "unpredictability of customer or market demand" (34%), suppliers meeting standards for quality and safety (31%), protectionism or other trade restrictions (31%), large carbon footprint (20%), supply chain visibility (16%) and piracy (7%).

These findings echo similar results from our own informal research at Spend Matters. But what's more interesting to us is how companies are coping with the myriad of risks. In our experience, they're doing far more than just hiring consultants to create fancy decks that sit on the shelf. Smart organizations are defining priorities and strategies (with or without the help of consultants) and are then making the right set of investments in technology to automate risk monitoring in key areas. They're also making concerted efforts in building out supplier development teams and efforts to respond more quickly to risk factors.

- Jason Busch

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