Supply Chain Risk – Download Our Free Paper Now

We have a new briefing paper (sponsored by riskmethods, but written independently) available to download now. It is titled Supply Chain Risk – Getting To Grips With n-Tier Visibility, and  you can get it here, free on registration.

It looks at risk in the supply chain - or supply network even, as issues such as weaknesses in transportation or other wider issues can also be important. These sit outside the linear “product-based” supply chain but nonetheless need to be considered.  Anyway, here is an excerpt from the paper – we hope you will read the whole thing.

Supply Chain Risk – Getting To Grips With n-Tier Visibility

Managing n-Tier Supply Chain Risk

The typical risk process may well involve identifying key or critical suppliers, and then obtaining information about those supplying firms. One key aim is to gain early information if and when there is any danger of a supply problem, so that with early knowledge, the buyer can (in theory at least) take action to mitigate the risk.

But it isn’t just the first tier (the suppliers who directly provide goods or services to the buying organisation) that is important. Often the critical supply chain risks, whether supply interruption or other risk types, lie at the second tier (the suppliers’ suppliers) or even further “down” the supply chain, at the n-tier as we call it. Perhaps in our example above, the polypropylene manufacturers themselves might all buy a vital raw material from the same source. These unseen dependencies in the supply chain are very common, and few organisations have full visibility of their position.

So while many problems do arise from direct suppliers, gaining visibility of the further and wider supply chain is vital if a firm really wants to understand the potential risk issues that could have serious effects on the business.

The case studies we have included in this paper give several examples of where an understanding of the n-tier in the supply chain is vital if the organisation wants to manage risk properly. There are many other similar but somewhat different examples where a lack of understanding of the wider supply picture has brought unexpected risk to buyers.

For instance, where goods are being shipped in from other countries via sea, the ports and shipping lanes used can be a source of risk. If there is a labour dispute, or a natural disaster that affects a port, the buyer may find that although there are various direct suppliers in place, apparently providing a degree of risk mitigation, there is a problem if they all ship through that same port.

One interesting example of this came a few years ago, when some fast-food restaurants in Japan ran into problems because a high proportion of their potatoes (for making French fries) were shipped through west-coast ports in the USA which went through a long-running labour dispute. The buyers appeared to have alternative suppliers who provided some risk mitigation, but the weakness in the supply chain came from the route used, not the variety of approved suppliers.

The message is simply that buyers need to understand their full supply chains for critical materials, not just the first-tier direct providers but the second tier and more wherever possible. It is not always easy to achieve this, but for any organisation that is serious about risk management, it is essential.

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