Supply chain risk is real; weather or not you like it……

Perhaps we all get more risk averse, or at least conscious of risk, as we get older. Perhaps it is the weather we’ve been having recently across many parts of Europe.

But whatever it is, I’m increasingly thinking that managing supply chain risk is not just one of the procurement function’s key roles; it is arguably THE key role.  OK, I accept that cost management is never going to be unimportant; but what is the point of having a ‘great deal’ if you can’t get the raw materials  to the factory, your supplier causes a catastrophic product failure; or leads you into an ethical dilemma that costs you measurable market share?

Back to the weather.  The UK has seen huge disruption over the last 2 weeks and there is no sign it is getting much better.  And it is not just the UK; as the BBC reported last week,

It is worth noting that the German railway, with an international reputation for efficiency, has been ravaged by snow delays.  On Wednesday night, 3,000 passengers spent the night on German trains. More than 200 were stuck in Frankfurt station alone, sheltering in carriages after hotel rooms filled up.

Even in Scandinavia, where cold weather is not exactly unexpected, there are still problems.

"As far as trains are concerned, there were severe problems last year which led the government train company to take some measures. It has been a little bit better this year," says Anders Bolling, a reporter on Om Dagens Nyheter.  "In February and March there were catastrophic scenes where people were stranded for days."

In this recent (interesting) survey by the Business Continuity Institute, sponsored by Zurich Financial Services, 72% of respondents had suffered some disruption last year, and, “adverse weather jumped to the top as the main cause of disruption around the world with 53% citing this, up from 29%”

So what should we be doing in our organisations in terms of wider risk management and specifically weather related issues?  Focusing on the latter for now, and assuming that sacrifices to the weather gods are somewhat impractical, it is worth looking at the following.

  • Identify which of your key suppliers may be most vulnerable based on their location and supply chain profile.
  • Increasing stock levels of key raw materials or other critical items; adjusting re-order and safety stock levels over the winter months.
  • Also consider increasing stocks of finished goods in case of production interruptions.
  • Considering the transport/continuity implications of key supplier choices; local supply has sustainability benefits as well as potentially making it more likely that delivery won’t be affected by weather (although that won’t help if your own premises are in the middle of a huge snow drift)!
  • Don’t just focus on factory type ‘raw materials’ – I remember problems years ago when we couldn’t get key ‘product literature’ (leaflets, forms etc.) distributed to ‘retail’ outlets, and what seemed like a pretty tactical spend category suddenly became highly important as a key element of the business ground to a halt!
  • Ensure contingency plans are in place just in case the worst does happen and supply is interrupted.
  • And don’t forget the ‘people’ side of things; remote (home) working capability is becoming more and more important anyway, and if your team are going to be stuck at home on a regular basis, then make sure they can still run that tender / research the market / Skype with key suppliers...

Any other bright weather-related supply chain ideas? Apart from hibernating with a few bottles of 30 year old Armagnac (which is how I feel at the moment...)

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