Bird Flu 2.0 – Inoculate Your Supply Base Against Supply Chain Risk

Over on Spend Matters PRO today, we feature a how-to guide covering bird flu, a topic that could potentially impact a wide range of Spend Matters readers. Subscribers can access the full research brief, Beyond Bird Flu 2.0 – Inoculate Your Supply Base Against Supply Chain Risk, as well as other related content in our Risk, Performance and Compliance Section of Spend Matters PRO.

Given the topic’s importance, we’re providing an excerpt that frames the importance of taking the latest strain of bird flu more seriously – as well as the potential risk that pandemics pose to our supply chain. Full subscribers get complete recommendations and the “how to” list.

Avian flu is not a new topic. The original bird flu strain (H5N1) that killed hundreds in the prior decade provoked a great deal of media coverage - and still lingers. There have been 11 reported deaths so far in 2013, which is actually higher than what has been reported with the recent H7N9 strain. We’re not going to cry “Chicken Little” in this latest supply risk du jour and get too caught up in the specifics of H7N9. There is no shortage of media reporting on it.

The bigger story is that even after all the repeated adverse events in the supply chain, companies still seem to struggle with how to reduce supply risk and increase supply resiliency/integrity with limited budgets. It’s not easy. But even though risks continue to proliferate within our increasingly global, interconnected, digitized, and outsourced supply chains, I wonder whether the media fatigue surrounding these events de-sensitize management to the risks.

I’ve found that the inconvenient truth with supply risk is that unless you’ve been directly impacted, you’ve likely been under-investing (unless you are a “supply resiliency leader”). No, I don’t have study on this myself, but Accenture and The World Economic Forum did a nice report that we covered last week that estimated shareholder value loss of 7% from global supply chain risk.

The report is extremely broad and thorough, but a lot of it deals with countermeasures that can’t necessarily be performed by a practitioner in the supply organization. Having worked with many firms implementing supply risk programs, I thought I’d provide a series of questions for practitioners who are tasked with or touched by supply risk, and use Yum Brands as an example firm:

  •  Do you even measure supply risk impact (e.g., profit at risk), supply risk probability, or supply resiliency (i.e., continued supply performance in the face of high supply risk)?  Yum Brands planned to open 700 stores in China this year (it already has 4,000 KFC and 700 Pizza Hut stores there, where it earned over 50% of its revenues in 2012) Source: Reuters. With a firm that had a reputation for high quality food (especially compared to street market fare), do you think this will have an impact? Sales have already been impacted and forecasts have already been downgraded.
  • Do you link supply risk to enterprise risk management at the C-level and then down into various procurement and supplier management processes across the various lifecycles (supplier, contract, category, product, etc.)? 
  • If you don’t do the latter, then how do you ‘protect’ supply performance (i.e., supplier performance, category performance, and supply base performance) based on stakeholder expectations? How do you factor in “performance protection” when you build those scorecards and measurement processes? 

Full subscribers can access the brief on Spend Matters PRO: Beyond Bird Flu 2.0 – Inoculate Your Supply Base Against Supply Chain Risk.

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