Risk and Opportunity in Your Supply Chain

Identifying possible silver linings is good business

Published: Monday, February 14, 2022 - 13:03

ISO 9001:2015, Clause 6.1 introduces the term “actions to address risks and opportunities,” as a replacement for the standard’s previous term, “preventive actions.” The juxtaposition of “risks” and “opportunities” seems to imply a relational nature between the two concepts. But is it still realistic to apply this notion after the beating administered by 2020 and 2021?

I think most organizations would agree that 2020 and 2021 have been a challenge above and beyond anything in the last three decades, as unknown risks to workforce and supply chain have compounded already known, but growing, cybersecurity risks. If we were to take a SWOT approach going into 2022, perhaps we could identify possible opportunities in the risks that are sure to carry over from the past two years.

Supply chain risk

Between 2020’s infamous toilet paper crisis and Evergreen’s ship Ever Given blocking the Suez Canal for six days, supply chain management has become a board-level topic. Gone are the days when supply chain was an afterthought or esoteric tactic brought in to squeeze out that last drop of profitability.

“CEOs and boards are charged with the long-term growth and strategy of a company, so they are concerned about barriers to future growth,” says Polly Mitchell, VP of industry outreach and thought leadership at Kinaxis. “To operate at the board level, supply chain professionals need to be ready and able to connect their value to the wider enterprise, such as sales, marketing, operations, and finance.”

Every new disruption highlights just how intimately supply chains are linked, so effects of disruption are cascading.

“The combinatorial effect of these global constraints leads to cascading impacts that are difficult to untangle,” explains Mitchell. “Connecting beyond a company’s four walls with multi-enterprise collaboration is one critical direction to pursue, since today’s global value chains require tighter integration. Shrinking the time between planning and execution is crucial—planning cycles vary considerably by industry and even company, but whatever cadence a company had, it most likely shortened in recent times. Monthly plans became weekly, weekly plans became daily, and in some cases daily became hourly.”

Supply chain opportunity

We can see how this risk is identified: Internationally integrated supply chains are susceptible to cascading effects of disruption. Therein lies the opportunity: multi-enterprise collaboration.

Plans to mitigate this risk could include adopting new practices and technologies. It’s not a great leap to imagine that new practices might foster new partnerships that could, in turn, lead to new markets.

Likewise, new technologies that are used to mitigate supply chain constraints could lead to new product opportunities.

In fact, any action taken to address an organization’s supply chain durability and efficiency is bound to have a net positive effect on its customers’ experience. Improved customer experience often provides an opportunity to expand market share.

Although disruptions are a fact of life, major events can be minimized, and supply chain resiliency can increase with technologies like digital twins—virtual models designed to accurately reflect the physical supply chain and enable testing of an infinite number of possible scenarios.

“Supply chain visibility has become critical across the end-to-end supply chain,” says Allen Jaques, industry thought leader at Kinaxis. “Visibility extends beyond simple information-gathering and static input data to include calculated key performance outcomes (e.g., fill rates, shortages, excess and obsolete inventory, order actions, margin projections, and revenue projection) so you can model and represent several states of the supply chain—historical, present, and future.”

Here, Jaques points out the risk of siloed supply chain information. I don’t think it’s possible to overstate the benefits of enterprise-wide data being visible.

Again, using the SWOT method, we can see that the weakness of fragmented supply chain data encourages integration that reveals new opportunities, such as increased profit margin and brand reputation.

“Integrated data can help retailers predict future stock shortages as well as prioritize higher-margin products in the supply chain,” explains Shashikiran Pb, vice president of supply chain and manufacturing at Tredence. “Merchandising companies can use machine learning algorithms to allocate inventory to stores or warehouses in near real-time, giving businesses more control over their supply and shipments than ever before.”

In truth, it may not be that risks necessarily create opportunities. Rather, it seems that opportunities for improved processes and expanding business can be a byproduct of addressing risk.

About The Author

Ryan E. Day

Ryan E. Day is Quality Digest’s project manager and senior editor for solution-based reporting, which brings together those seeking business improvement solutions and solution providers. Day has spent the last decade researching and interviewing top business leaders and continuous improvement experts at companies like Sakor, Ford, Merchandize Liquidators, Olympus, 3D Systems, Hexagon, Intertek, InfinityQS, Johnson Controls, FARO, and Eckel Industries. Most of his reporting is done with the help of his 20 lb tabby cat at his side.