Supply Chain and Risk Management: Developing Multi-Tier Visibility Into Risk Factors

The third idea that I suggested as part of the ten items in my “what’s next” presentation at ISM’s Risk Conference in Chicago was “Developing Multi-Tier Visibility Into Risk Factors” as a central element of risk programs. This requires going a few steps beyond doing the 80/20 rule on top suppliers. For one, procurement and risk management teams must consider not just their largest suppliers (especially in a direct materials supply chain), but also smaller ones as well. Then it also requires understanding overall exposure under the tier one level based on multi-tier supply chains and supplier relationships.

Certain industries proactively define and set up their supply chains (e.g., electronics) making this a simple challenge to overcome – if it is even a challenge at all. But for other industries, especially in industrial manufacturing, developing multitier visibility can be challenging indeed. But there are some good places to start. Two items to always keep in mind are:

  1. Always investing time to understand what lurks under the tier-one surface
  1. Appreciating the space that exists in between organizations – e.g., new information exhaust – and making investments to gain access to this information

In addition, a combination of leadership, talent, and the right systems (including technology) are key to building multitier visibility. Indeed, such an approach requires a new mindset focused on understanding the broader supply chain as well as the ability to muster the right resources to make it happen.

When it comes to technology, some companies will no doubt begin to take greater advantage of existing capabilities offered by providers such as E2Open on the multitier level, especially from a supply chain and inventory perspective. But I believe that in addition, new networks and platforms will change everything around transactional facilitation and insight across multiple tiers. So far, SAP/Ariba (future developments), Tradeshift, and Nipendo are the ones to watch here. But we would not count out other providers, including the EDI folks such as GXS and Sterling/IBM, either.

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