The New Game of Supply Chain Risk Management

Supply chains are now more dynamic and uncertain—an interdependency of two-way relationships that increases risk and vulnerabilities for companies. In fact, obtaining a holistic view of supply chain risk—and thus being able to mitigate it—has become a source of competitive advantage for high-performance businesses.

Changes on nearly every front have combined to make modern supply chains much more complex and interconnected—and so much more risky. These changes include global sourcing and production, information and communications technology, consumer expectations, pricing volatility and product availability, financial conditions and regulatory requirements.

The end result is that today’s supply chains are more a network of two-way relationships than a linear chain. Developments in one area tend to affect other areas, whether positively or negatively. To understand and manage the risks in this new interconnected supply chain, companies need one thing above all: a holistic view of risk across the enterprise.

Critical as it is, supply chain risk is often precariously undermanaged at many companies. This state of affairs is partly a legacy of the pressure on margins of the past few years, but it has left companies perilously exposed.

Even if they are considering supply chain risk, companies often look at it in silos, missing the across-the-chain view that would enable them to recognize similar risks that should be managed from a company-wide perspective. It is this holistic view that generates real value because it can help show how a decision taken in one function may affect the entire organization.

To stay ahead of the risks, companies pushing for high performance are building risk into the way they approach supply chain management. Given that risk is a business constant, holistic supply chain risk management remains one advantage yet to be tapped fully.

Many companies are evolving new operating models in order to adjust to the risk interdependencies of the supply chain as they strive to achieve high performance. In Accenture’s experience, high-performance businesses are approaching supply chain risk in three ways:

• Assessing risk. To assess risk, some basic questions need to be asked; for example, what exactly is the supply chain? An inventory of key risks is always required, along with the effects and likelihood of each risk.
  
  
• Designing a framework to manage the supply chain. Once assessed, supply chain risks need to be managed via a framework that integrates all the key risk capabilities required.
  
  
• Implementing supply chain risk mitigation. Companies need a robust action plan funded with the appropriate resources to address the core of the risk issues and implement treatment—not just symptomatic relief.