The number of potential supply chain risks that OEMs face on a daily basis is a big challenge for purchasing departments. It requires supply chain risk management solutions that can help monitor and mitigate risk around supply, (including shortages, supplier bankruptcy, counterfeiting), geographic issues (including natural disasters and political instability), fluctuations in demand, currency fluctuations, and logistics.
Supply chain risk management covers a variety of risk factors including supply-side risks, external risks such as fluctuating demand and natural disasters, internal risks such as manufacturing issues and labor strikes, and demand-side risks such as recalls and distribution failures, according to Supply Chain Insights.
As a result, procurement departments need scalable solutions that offer a variety of options for monitoring and mitigating all types of risk. Tools need to help buyers map and monitor supply chain risk around the globe and drill-down beyond first-tier suppliers. They also need to ensure supplier compliance, as well as product reliability and traceability.
A Supply Chain Insights report, The Global Supply Chain Ups the Ante for Risk Management, finds that the most successful risk management programs are “multi-prong with an equal focus on prevention and recovery.” They “focus on mitigating multiple issues – talent availability, volatility, product quality and supplier reliability – causing business pain.”
Risk management is fundamental to global organizations, said Lora Cecere, founder and CEO of Supply Chain Insights, in the report. One of the key areas that companies have focused on is supplier management. Over the past decade companies have initiated supplier development programs to mitigate risk, she said, which focuses “on helping improve supplier health,” in comparison to traditional programs that focus on “the buy-sell relationships and reducing supplier costs.”
When building a risk management program, Cecere recommended keeping five key factors in mind: leadership matters, focus on multi-tier inventory management, implement supply sensing & supplier visibility programs, it’s much more than technology, and not all risks can be prevented.
Some of the biggest risks faced by many OEMs include product quality issues, supplier viability, demand volatility, economic uncertainty, natural disasters, and computer security. Here’s a sampling of risk management solutions that take into account many of these risk factors.
Aravo Solutions Inc., a cloud-based software, data and due diligence service provider for managing third-party risk and compliance, segments its solution into four areas: registration and qualification of third-party and supplier relationships, anti-bribery and anti-corruption (automating due diligence processes and regulatory compliance across relationships), responsible sourcing (including conflict minerals), and data privacy and security (monitoring third-party data policies and practices for compliance).
In January 2015, the company generally released the Aravo Enterprise solution suite that includes a pre-built, best-practice application for third-party and supplier registration and qualification. Claimed as the market’s first standardized, pre-built application for third-party registration and qualification, the Aravo Third-Party Registration & Qualification provides pre-built, best-practice questionnaires, notifications, approval workflows, searches and reports. It “includes pre-defined integration with publicly accessible external content to improve validation and approval processes to ensure accuracy of the information provided by third-parties,” said the company.
This approach significantly reduces the time and effort required to incorporate the content from third parties into other participating internal systems for mission-critical processes, Aravo said.
The release also addressed the cost to maintain global compliance programs by including a new Graphical Workflow Builder and enhancements to survey form building that make it faster and easier to build and maintain compliance-oriented processes. “This is critically important in order to establish the agility necessary to remain in compliance with the evolving regulatory landscape on an annual basis,” the company said.
Kinaxis Inc. takes a different approach to supply chain risk management. The company offers an integrated cloud-based sales and operations planning (S&OP) and supply chain planning solution called RapidResponse. This solution looks at S&OP and supply chain planning as a unified solution to offer global supply chain visibility, concurrent supply chain planning, and cross-organizational collaboration.
The solution covers multi-tier demand and supply chain visibility, short- and long-term demand and supply chain planning, supply chain risk identification and mitigation, and financial/operations performance management. It also allows companies to simulate virtually any kind of what-if scenario such as a change in supply, demand, bill of materials (BOM) or pricing.
The Kinaxis solution provides several application options, enabling the progressive selection of supply chain planning processes for multiple functions such as S&OP planning, demand planning, aggregate supply planning, capacity planning and supplier collaboration.
Kinaxis segments risk into three buckets: anticipated, uncontrollable and unanticipated. Risks such as supplier quality/performance, regulations, counterfeit products, and supplier base changes are a part of business that can be controlled, said the company. However, those that can be anticipated but are difficult to quantify or plan for include demand fluctuations, supply disruptions, and availability/pricing of raw materials. Risks out of an organization’s control, cited by Kinaxis, include natural disasters – as recently witnessed during the 2011 Japan earthquake and tsunami – political unrest, terrorism, and accidents.
Some of the business practices meant to make the supply chain more efficient also create risk, according to Kinaxis. These include outsourcing, single-source suppliers, centralized suppliers and/or operations, and siloed business processes.
Risk management helps prevent some of these risks and also help businesses be better prepared to handle risk and minimize damages, Kinaxis said.
Similarly, Resilinc, a provider of supply chain resiliency solutions, delivers a cloud-based supply chain resilience and risk management analytics solution platform. Founded in 2010 by ex-Cisco supply chain risk management practitioners, the Resilinc solution provides end-to-end supplier network mapping and visibility, proactive disruption risk planning and quantification, global disruption event monitoring, and incident response.
The technology allows companies to focus on high-risk suppliers and parts based on their risk thresholds, and provides alerts, mitigation workflows and event monitoring and analysis for quick responses to incidents.
Delivered as a single, integrated solution, the core supply chain risk management platform, SupplyIntel, is segmented into three focus areas – multi-tier visibility, supply chain risk scoring, and supplier onboarding to speed up the supplier engagement process. Resilinc’s network of participating supplier sites exceeds 50,000 that represents about one million parts.
Resilinc Omniview for multi-tier visibility enables supply chain management teams to visualize the business relationships across the multiple tiers of their supply chains, and is designed to help protect against supply capacity issues or unexpected material premiums, the company said. It also supports advanced sourcing practices and enhanced new product designs, which enable companies to explore new cost-saving opportunities, and identify and address risk mitigation needs in their extended supply chains, said Resilinc. Key capabilities include multi-tier graphical visualization, the ability to pin-point sub-tier risk aggregation and recognize bottlenecks, and expanded multi-tier BOM collection and visibility.
Resilinc FlexRisk for supply chain risk scoring delivers a view of supply chain risk at the product and part-level across the enterprise in a single centralized location. This includes the collection of supplier financial risk, site location risk, operation recovery risk and critical operational risk score elements related to suppliers, including operational KPIs such as cost, quality, delivery reliability and lead time performance.
The Supplier Onboarding capabilities enable suppliers to avoid duplicate data entry by sharing their information with the customers they approve on the platform.
The platform also includes modules for specific requirements around conflict minerals compliance, business continuity planning (BCP), corporate social responsibility (CSR), supplier capacity management, and supplier parts change notification. Two new modules – conflict minerals compliance and supplier capacity management – were added in 2015.
The Resilinc Conflict Minerals Module is focused on driving down the costs of reporting and increasing supplier participation rates across global supply chains. A key feature includes a supplier network-based approach that enables suppliers to publish CFSI templates once and share them with many customers.
The SupplyIntel Supplier Capacity Management module helps mitigate “supplier capacity risks by evaluating and assessing customer demand forecasts in conjunction with intelligence on supplier staffing levels, management experience, technology and equipment capabilities, and existing or projected commitments to other customers.”
“It then applies risk scoring, risk thresholds, and analytics at the partner and part levels to model capacity requirements and prioritize risks for monitoring and remediation,” Resilinc said.
When evaluating a supply chain risk management solution, procurement teams should look for solutions that help monitor and mitigate both anticipated and unexpected risks around supply and demand that could result in supplier disruptions. These solutions need to help OEMs minimize the risk to their supply chains and avoid costly downtime.
The post Tools for Managing Supply Chain Risk appeared first on Verical Connect.
Related posts:
Distribution: Restoring the Balance Between Supply & Demand
NDAA Raises Stakes on Component Traceability
Best Practices are Essential in Online Sourcing