Addressing Supply Chain Risk

Why are our supply chains in such a mess? While Covid made it much worse, it merely reflected the weakness in how most companies view their supply chains.

There are two primary causes of our current woes, and Covid is not one of them.

The first is that leadership failed to comprehend the importance of supply chain expertise and thinking in ensuring that we can get what we need and thereby get our customers what they need when they need it.

The second is the decision to outsource high labor jobs to low wage rate counties to reduce costs. We all know time is money, but most forgot that when they decided to extend the supply chain. We know that simple is better than complex, but most forgot that when they decided to add complexity to the supply chain.

This was not unpredictable. Most supply chains are operating just as they were designed: to function effectively when there are no upheavals of any kind anywhere.

Many pundits, and sadly many highly visible executives, have placed the blame on Just in Time (JIT) for the current woes. That reflects another failure to understand. JIT is not about carrying the lowest inventories possible. Never was; never will be. Except by those who focus only on current income statements and balance sheets.

The assumption that revenues will be received as long as we get orders and operations doesn’t screw it up is laughable; except that it is that assumption that has us where we are.

So what can you do now to address the risks of your supply chain?

Start by identifying the first tier suppliers for your most critical product family. Not just where you issue the PO, but where the product is actually made and what options that supplier has for producing it elsewhere. You’ll likely be surprised by how little your team actually knows about even this simple starting place.

Next, move to the second tier of that most critical family. Where does your supplier get his critical supplies? What options does he have?

Eventually you’ll move to understanding the first few tiers of your other product families.

Do you use Salesforce? Many do. It has a simple maps add-on, through which you can indicate the locations of your first tier supplier operations. Then your second. As a storm approaches somewhere in the world, you can see if your key suppliers will likely face challenges. Government upheavals? Governments shutting down areas as part of the response to Covid or some other cause.

It’s not hard to get the information to anticipate problems. Yes, it takes attention and effort to set it up, and it takes someone caring enough to look. Will that prevent all your future supply chain challenges? Of course not. But if it flags many of them and you are proactive, the customer impact of changing events worldwide will be reduced.

And that’s your responsibility.

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