Supply Chain Management

Supply Chain Management

Learning Objectives

• Define Supply Chain Management (SCM).
• Discuss the benefits of Supply Chain Management.
• Identify and discuss the different components of SCM.
• Understand the importance of Supply Chain Management.
• Discuss the role of Logistics in SCM.
• Identify the functions of Supply Chain Management.
• Discuss the importance of Supply Chain Security.
• Learn what is supply chain risk management and how to manage known and unknown risks.
• Understand what a value chain is and its components.

What is Supply Chain Management?

• Supply Chain Management (SCM) is the broad range of activities required to plan, control, and execute a product’s flow, from acquiring raw materials and production through distribution to the final customer, in the most streamlined and cost-effective way possible.
• SCM is an expansive, complex undertaking that relies on each partner – from suppliers to manufacturers and beyond – to run well.
• Supply chain sustainability covers environmental, social, and legal issues, in addition to sustainable procurement and the closely related concept of corporate social responsibility.

Benefits of Supply Chain Management

1. New efficiencies

   • Implementing SCM software can automate inventory management, reducing the likelihood of stockouts or excess inventory.
   • This efficiency can lead to streamlined operations and faster order fulfillment.
   • Example: A company using advanced SCM tools might forecast demand accurately, enabling it to optimize production schedules and minimize wastage.

2. Higher profits

   • Effective supply chain management can lead to cost savings, which directly contribute to higher profits.
   • Example: A manufacturer that improves its logistics and distribution processes can reduce transportation costs, thereby increasing its profit margins on each sale.
   • SCM strategies like lean manufacturing can minimize waste and improve overall efficiency, further boosting profits.

3. Lower costs

   • Through supply chain optimization, companies can identify and eliminate unnecessary expenses.
   • Example: A retailer may negotiate better terms with suppliers, reducing the cost of goods sold.
   • Companies can benefit from economies of scale by consolidating orders or collaborating with other businesses for bulk purchasing, thus lowering procurement costs.

4. Increased collaboration

   • Collaborating closely with suppliers and partners can lead to mutual benefits and improved performance throughout the supply chain.
   • Example: A manufacturer might collaborate with suppliers to develop innovative products or improve existing ones.
   • This collaboration can lead to faster product development cycles and a competitive edge in the market.

Components of SCM

1. Planning: Helps to identify the demand and supply trends in the market, which in turn helps create a successful supply chain management system.
2. Information: Market trends, supply, and demand for a particular product can be best understood if the information is properly and timely disseminated through the many levels of the business.
3. Source: It is necessary that suitable quality raw materials are procured at cost-effective rates. Good quality resources can create good quality products and maintain their reputation in the market.
4. Inventory: It is important that an inventory is kept and thoroughly maintained. Inventory management is critical to the function of supply chain management because without proper inventory management, the production, as well as sale of the product, is not possible.
5. Production: For the process of production to start, it is essential that proper planning and supplies of goods, as well as the inventory, are well maintained.
6. Location: A suitable location which is well connected and very close to the source of essential resources for production is vital to a business’s prosperity.
7. Transportation: This is vital for carrying raw materials to the manufacturing unit and delivering the final product to the market.
8. Return of goods: As a part of a strong business process, one may expect the return of goods under various circumstances. Even the best quality control processes may have unavoidable momentary lapses.

Importance of Supply Chain Management

1. Improves customer service: Ensure customer satisfaction by making certain the necessary products are available at the correct place at the right time.
2. Provides major advantage for companies by decreasing the overall operating costs: Reduced supply chain cost can greatly increase a business’s profit and cash flow.
3. Helps ensure human survival by improving healthcare, protecting humans from climate extremes, and sustaining human life.
4. Improves the overall quality of life by fostering job creation.

Supply Chain Complexity

• Basic version of supply chain: company, suppliers, and customers
  • Material Flow
  • Cash Flow
• A more complex or extended supply chain: a number of suppliers and supplier’s suppliers, a number of customers and customers’ customers – or final customers – and all the organizations that offer the services required to effectively get products to customers, including third-party logistics providers, financial organizations, supply chain vendors, and marketing research providers.

The Role of Supply Chain Management Software

• Supply Chain Management Software is like a digital manager for companies that helps them keep track of everything involved in getting products from suppliers to customers.

• It helps with tasks like ordering raw materials, managing inventory, scheduling deliveries, and making sure products reach customers on time.

• It is a tool that helps businesses run their supply chain smoothly and efficiently, saving time and money while ensuring customers get what they need when they need it.

• There are also business software vendors that focus specifically on SCM. Some important areas to note include:

  • Supply chain planning software for activities such as demand management
  • Supply chain execution software for activities such as day-to-day manufacturing operations
  • Supply chain visibility software for tasks such as spotting and anticipating risks and proactively managing them
  • Inventory management software for tasks such as tracking and optimizing inventory levels
  • Logistic management software and transportation management systems for activities such as managing the transport of goods, especially across global supply chains
  • Warehouse management systems for activities related to warehouse operations.

• Infor, JDA software, Oracle, and SAP are well-known vendors of supply chain software.

• Technology – especially big data, predictive analytics, and the Internet of Things (IoT) technology, supply chain analytics, robotics, and autonomous vehicles – is also being used to help solve modern challenges.

• IoT can help with transparency and traceability to help boost food quality and safety by using sensors to monitor the temperature of perishable food while it's in transit.

Reduce Operating Costs

• Decreases Purchasing Cost
  • Retailers depend on supply chains to quickly deliver expensive products to avoid holding costly inventories in stores any longer than necessary.
• Decreases production cost
  • Manufacturers depend on supply chains to reliably deliver materials to assembly plants to avoid material shortages that would shut down production.
• Decreases total supply chain cost
  • Manufacturers and retailers depend on supply chain managers to design networks that meet customer service goals at the least total cost.

Improve Financial Position

• Increases Profit leverage
  • Firms value supply chain managers because they help control and reduce supply chain costs
• Decreases fixed Assets
  • Decrease the use of large fixed assets such as plants, warehouses, and transportation vehicles in the supply chain.
• Increases Cash flow
  • Speed up product flows to customer.

Societal Roles of SCM

• Ensure Human Survival
  • SCM helps Sustain Human Life - humans depend on supply chains to deliver necessities such as food and water
  • SCM Improves Human Healthcare - humans depend on supply chains to deliver medicines and healthcare.
  • SCM Protects Humans from Climate Extremes
    • Humans depend on an energy supply chain to deliver electrical energy to homes and businesses for light, heat, refrigeration, and air conditioning.
• Improve Quality of Life
  • Foundation for Economic Growth
    • Societies with highly developed supply chain infrastructure are able to exchange many goods between businesses and consumers quickly and at low cost.
  • Improves Standard of Living
    • Consumers can afford to buy more products with their income thereby raising the standard of living in the society.
  • Job Creation
    • Supply chain professional design and operate all of the supply chains in a society and manage transportation, warehousing, inventory management, packaging, and logistics information.
  • Opportunity to Decrease Pollution
    • Supply chain activities require packaging and product transportation. Some unwanted environmental pollutants such as cardboard waste and carbon dioxide fuel emissions are generated.
  • Opportunity to Decrease Energy Use
    • Supply chain activities involve both human and product transportation. As a by-product of these activities, scarce energy is depleted.
• Protect Cultural Freedom and Development
  • Defending Human Freedom
    • Military logisticians strategically locate aircraft, ships, tanks, missiles, and other weapons in positions that provide maximum security to soldiers and other citizens.
  • Protects Delivery of Necessities
    • Sophisticated packaging techniques, state-of-the-art surveillance cameras, global positioning systems, and RFID inventory tracking are some of the methods used to deter terrorists from accessing these vital logistics systems.

Logistics in Supply Chain Management

• The supply chain is about “moving” – or “transforming” – raw materials and ideas into products or services and getting them to customers.

• Logistics meaning may be given as, “moving materials or goods from one place to another”.

• The following areas of the logistics management process contribute to an integrated approach to logistics within supply chain management.

  1. Transportation: Many modes of transportation play a role in the movement of goods through supply chains: air, rail, road, water, and pipeline.
  2. Warehousing: The activities related to receiving, storing, and shipping materials to and from production or distribution locations. It is a very important factor, we need to consider to know the logistics meaning.
  3. Third and Fourth-Party Logistics: Third-party logistics providers (3PLs) manage one or more logistics services. Fourth-party providers (4PLs) play the role of a general contractor by taking over the entire logistics function for an organization and coordinating the combination of divisions or subcontractors necessary to perform the specific tasks involved.
  4. Reverse Logistics: How best to handle the return, reuse, recycling, or disposal of products that make the reverse journey from the customer to the supplier.

Functions of Supply Chain Management

1. Purchasing

   • Pertains to procuring raw materials and other resources that are required to manufacture the goods.

2. Operations

   • The operation team engages in demand planning and forecasting.

3. Logistics

   • It needs space for storage until it is shipped for delivery.
   • Transport for goods can be domestic or shipping to other countries, it is essential to ensure that staff members do all documentation properly.

4. Resource Management

   • All firms need raw materials, technology, time, and labor.
   • However, all the processes need to be efficient and effective.

5. Information Workflow

   • Information sharing and distribution are what keep all other functions of supply chain management on track.

Core Functions of SCM

• Management of suppliers
• Management of Raw Materials
• Transportation management
• Information management
• Tracking and monitoring
• Cost management
• Inventory management
• Distribution and Return management
• Management of Supply Chains
• Customer Satisfaction

Connectivity of Different Functions

• Many internal processes of a company are linked with the external processes. These areas are interconnected and affect profits, costs, and customer satisfaction.
• Example: The raw material reaches the manufacturer from the suppliers using transportation.
• Factors such as inventory management, transportation management, knowledge management, tracking, monitoring, and cost management are conducted.
• Outsourcing of functions
  • Businesses have taken advantage of technology to outsource work that can be done at reduced costs.
  • Outsourcing of functions does not necessarily mean lack of control.

Areas of Supply Chain

• Purchasing

  • The activity of acquiring goods or services to accomplish the goals of an organization.
  • The major objectives of purchasing are to:
    1. maintain the quality and value of a company's products,
    2. minimize cash tied up in inventory,
    3. maintain the flow of inputs to ensure the flow of outputs, and
    4. strengthen the organization's competitive position.
  • Purchasing may also involve:
    1. development and review of the product specifications,
    2. receipt and processing of requisitions,
    3. advertising for bids - (inviting interested parties to submit proposals or bids outlining their offerings, pricing, and terms.)
    4. award of supply contracts,
    5. inspection of good received, and
    6. their appropriate storage and release.

• Manufacturing

  • Is the production of merchandise for use or sale using labor and machines, tools, chemical and biological processing, or formulation.
  • May refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.

• Inventory Management

  • Activities employed in maintaining the optimum number or amount of each inventory item.
  • The objective of inventory management is to provide uninterrupted production, sales, and/or customer-service levels at the minimum cost.

• Demand Planning

  • Is the process of forecasting customer demand to drive execution of such demand by corporate supply chain and business management.
  • Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data and statistical techniques or current data from test markets.

• Warehousing

  • Performance of administrative and physical functions associated with the storage of goods and materials.
  • Include receipt, identification, inspection, verification, putting away, retrieval for issue, etc.
  • The warehouse has evolved into a distribution center, and even a facility to customize the final product via repacking, labeling, or other physical conversion.

• Transportation

  • Is the movement of people, animals, and goods from one location to another.
  • Modes of transport include air, rail, road, water, cable, pipeline, and space.
  • The transportation function is critical to the supply chain because it is where the rubber literally meets the road.

• Customer Service

  • The process of ensuring customer satisfaction with a product or service.
  • Customer service takes place while performing a transaction for the customer, such as making a sale or returning an item.

Supply Chain Optimization

• Supply chain optimization methods will permit your manufacturing operation to come closer to overall production and factory efficiency, leading to reductions within time and cost.

• Is the process of improving the efficiency, performance, and overall effectiveness of a supply chain network.

• It involves analyzing and refining various aspects of the supply chain to achieve strategic objectives such as minimizing costs, reducing lead times, enhancing customer satisfaction, and increasing profitability.

• It aims to streamline operations, maximize resource utilization, and synchronize activities across the entire supply chain ecosystem, from raw material suppliers to end customers.

• Ways you can optimize your supply chain:

  1. Inventory Control

  2. Supplier Inventory Management

  3. Demand Planning

  4. System Integration

  5. Supply Chain Security

  6. Inventory Control

     • Being fully aware of your inventory not only reduces cost, but it will enhance delivery time as well. Inventory accuracy is a must for any manufacturing operation that wants to expand their consumer base and target market.

  7. Supplier Inventory Management

     • Establishing a favorable relationship with your supplier will enable open communication.
     • Through open communication, you can share information about customer demand and inventory, which may optimize your demand planning.

  8. Demand Planning

     • You will need accurate customer forecasting and orders to develop a successful demand plan.
     • This will lead to cost and inventory reduction within your supply chain, ultimately leading to an increase in revenue.

  9. System Integration

     • Modern manufacturers cannot reach full potential without integrating an accurate and efficient system.
     • Whether it is an enterprise resource planning (ERP) or installing advanced planning and scheduling software (APS, gradually witness the improvements in production through systematic accountability and optimization.

Advanced Planning and Scheduling (APS) software in Supply Chain Optimization

• What is APS Software?

  • APS software utilizes advanced algorithms and mathematical models to optimize various aspects of production planning and scheduling, as well as inventory management and distribution logistics.

• Some of the benefits of advanced planning and scheduling include the following:

  • Improved delivery performance
  • Boosts in Profits
  • Reduction in Inventory and Labor cost
  • Six-month ROI
  1. Supply Chain Security

• Part of the SCM that focuses on minimizing risk for supply chain, logistics, and transportation management system (TMS).

• Its goal is to assess and prioritize efforts to manage risk by layered defenses in agile manner.

• Examples of Supply Chain Security Activities

  • Verifying proper credentials for all participants within a supply chain
  • Screening all of the contents within a cargo that is being shipped
  • Notifying recipients of shipments in advance
  • Securing the cargo in transit or storage with the use of access controls, alarms, locks, and surveillance or tamper-proof seals.
  • Inspecting cargo at each stage of the supply chain or shipment process
  • Completing background checks on all employees
  • Meeting all compliance and security standards
  • Conducting regular risk assessments of supply chain segments, vendors, and partners.
  • Training employees to identify and resolve supply chain security risks.

• Before the September 11, 2001, terrorist attacks, supply chain security was not a major focus for many industries. Security measures primarily focused on traditional concerns such as theft and pilferage.

• The 9/11 attacks prompted a significant shift in global security priorities, including supply chain security. Governments and industry stakeholders recognized the vulnerability of supply chains to terrorist activities and began implementing measures to enhance security, particularly in the transportation of goods.

• Transported Asset Protection Association (TAPA) was actively engaged in enhancing supply chain security measures.

  • TAPA, founded in 1997, is an international organization that focuses on minimizing cargo theft and improving supply chain resilience.

• June 1, 2004, the International Maritime Organization (IMO) took a significant step in enhancing supply chain security by implementing the International Ship and Port Facility Security (ISPS) Code.

  • The ISPS Code was adopted in response to the heightened security concerns following the terrorist attacks on September 11, 2001, which highlighted the vulnerabilities of the maritime sector to security threats.

• June 1, 2005, the European Union (EU) made significant strides in bolstering supply chain security through the implementation of various initiatives aimed at safeguarding the movement of goods within its borders.

• October 13, 2006, the Safe Port Act was signed into law in the United States, introducing several significant provisions aimed at enhancing port and maritime security. Among these provisions were expansions and enhancements to two key programs:

  • the Customs-Trade Partnership Against Terrorism (C-TPAT)
    • Participants commit to implementing and maintaining specific security measures throughout their supply chains in exchange for various benefits, such as reduced inspections and expedited processing at U.S. ports of entry.
  • the Container Security Initiative (CSI).
    • CSI focuses on screening high-risk maritime cargo containers at foreign ports before they are loaded onto vessels bound for the United States.
    • CSI aims to prevent security threats from reaching U.S. shores.

• January 23, 2012, the United States released its first-ever National Strategy for Global Supply Chain Security. The strategy outlined a comprehensive approach to address the evolving challenges and threats faced by supply chains, emphasizing collaboration between government agencies, industry stakeholders, and international partners.

• October 3, 2012, the National Institute of Standards and Technology (NIST) released the NIST Special Publication 800-161: Supply Chain Risk Management Practices (SCRM). It addresses the increasing recognition of the importance of managing risks within the supply chain, particularly in the context of cybersecurity and the protection of sensitive information and critical infrastructure.

• March 28, 2014, ASIS International (American Society for Industrial Security), a leading global association for security management professionals, released the ASIS/ISC.1-2014: Supply Chain Risk Management: A Compilation of Best Practices. This standard was developed in collaboration with the International Organization for Standardization (ISO) and the American National Standards Institute (ANSI). It provides guidance and best practices for organizations to effectively identify, assess, and mitigate risks within their supply chains.

• There are many cyber threats facing utility companies, including hacking, phishing, ransomware, and other risks which lead to the UTC cyber supply chain risk for utilities. Utility companies face many challenges when improving their security posture, including the use of legacy systems, the need to comply with ever-evolving standards, and the cost of security initiatives.

• October 18, 2018, the Federal Energy Regulatory Commission (FERC) approved a new mandatory cybersecurity standard known as CIP-013 (Critical Infrastructure Protection Standard CIP-013-1 - Cyber Security - Supply Chain Risk Management) for the North American Electric Reliability Corporation (NERC). This approval marked a significant development in bolstering cybersecurity measures within the electric utility sector.

Importance of Supply Chain Security

• Supply chain security should be a high priority for organizations as a breach within the system could damage or disrupt operations.
• Vulnerabilities within a supply chain could lead to unnecessary costs, inefficient delivery schedules, and a loss of intellectual property.
• Delivering products that have been tampered with or unauthorized could be harmful to customers and lead to unwanted lawsuits.
• Security management systems can help protect supply chains from physical and cyber threats.

Supply Chain Security Management System

• ISO 28000 specifies the requirements for establishing, implementing, maintaining, and improving a security management system, including the aspects relevant to the security of the supply chain.
• These aspects include, but supply risks such as threats from terrorism, fraud, and piracy have serious implications for businesses.
• Understanding the certification for your business is of utmost importance.
• There should be a process to make sure that quality work is being done at all points in time.

Security Management Certification for the Supply Chain

• It is a certification that specifies the needs of a security management system that is made specifically for a business’s supply chain.

• Having an ISO 28000 Certification would help boost the presence and brand value in multiple ways.

• Key aspects of ISO 28000:

  1. Scope:

     • ISO 28000 applies to all types of organizations involved in the supply chain, including manufacturers, distributors, logistics providers, freight forwarders, and retailers.
     • It is applicable to both physical and information flows within the supply chain, covering aspects such as transportation, storage, handling, and communication of goods and related information.

  2. Security Management System (SMS):

     • ISO 28000 requires organizations to establish, implement, maintain, and continually improve a security management system tailored to their specific supply chain security needs.
     • The SMS should be based on a risk-based approach, identifying security threats, vulnerabilities, and potential consequences to determine appropriate security measures and controls.

  3. Risk Assessment and Mitigation:

     • Organizations are required to conduct comprehensive risk assessments of their supply chain operations to identify security risks and vulnerabilities.
     • Based on the risk assessment, organizations must develop and implement risk mitigation strategies and security measures to address identified threats effectively.
     • This may include physical security measures, access controls, information security controls, and contingency planning for potential security incidents.

  4. Legal and Regulatory Compliance:

     • ISO 28000 emphasizes the importance of compliance with applicable legal and regulatory requirements related to supply chain security.
     • Organizations must ensure that their security management system aligns with relevant laws, regulations, international conventions, and industry standards governing supply chain security, trade, transportation, and customs procedures.

  5. Continuous Improvement:

     • ISO 28000 promotes a culture of continuous improvement in supply chain security management.
     • Organizations are required to regularly monitor, evaluate, and review the effectiveness of their security management system, identify opportunities for improvement, and take corrective actions as necessary to enhance security performance and resilience.

  6. Supply Chain Collaboration:

     • ISO 28000 encourages collaboration and cooperation among supply chain stakeholders to enhance security across the entire supply chain network.
     • This includes sharing security-related information, best practices, and resources to collectively address security threats and vulnerabilities that may impact the supply chain ecosystem.

Benefits of Supply Chain Management System

• Here are a few benefits of Security Management Certification for the Supply Chain:

  1. Assurance on quality

     • A simple reason behind this advantage is that your company is focused towards delivering quality service and products at every time.

  2. Better marketing Possibilities

     • A Security Management Certification for the Supply Chain would reduce the number of clients you lose and also help you grow on business.

  3. Improved profitability

     • With Security Management Certification for the Supply Chain, the entire Supply Chain would be visible with its possible threat points, thus you can improve the profitability at any time.

Supply Chain Collaboration

• Supply Chain Collaboration: When two or more discrete organizations work closely together to meet shared objectives.
• These objectives are typically focused on cost reduction, customer service improvement, or raising aspects of supply chain performance.
• Parties Involved in Supply Chain Collaboration:
  • A retailer might collaborate with a wholesaler or manufacturer from which it purchases goods.
  • A manufacturer might collaborate with a raw materials supplier to add value for its end-customers.
  • A raw materials supplier might collaborate with one or more transport companies to generate service and cost benefits for its largest manufacturing customers.

Importance of Supply Chain Collaboration

• Most supply chains are decentralized, sometimes involving dozens of companies, all playing different roles in the demand/supply cycle.
• Supply chains still comprise a mix of companies, some of which collaborate with one another, while others maintain traditional supplier/buyer relationships.
• Evolution of Supply Chain Collaboration
  • Organizations recognize the need to collaborate.
  • Steady progress is being made aided by web technology that helps companies share information, system integration for seamless supply chain handoffs.
  • Brave leaders in supply chain collaboration are neither afraid to share supply chain risks nor too self-serving to share the rewards.

Steps to Successful Collaboration

• Collaborate in Areas where you have a Solid Footing

  • Most successful collaborations build on strengths rather than compensating for weaknesses.
  • Potential collaborators should be sure they have the right supporting infrastructure in place in advance of any collaborative effort.

• Turn Win-Lose Situations into Win-Win opportunities with the Right Benefit-Sharing Model

  • Some collaborations promise equal benefits for both parties.
  • Rather than shying away from asymmetric collaborations, smart companies can make them work by agreeing on more sophisticated benefit-sharing models.
  • Benefit-sharing can help to overcome differences in strategic priorities.

• Select Partners based on Capability, Strategic Goals, and Value Potential

  • A better approach is one that assesses current customers or suppliers across three key dimensions:
    1. Is there enough potential value in collaborating with this partner to merit the effort?
    2. Do both partners have sufficiently common strategic interests to support the collaboration?
    3. Does the partner have the right infrastructure and processes in place to provide a basis for the collaboration?

• Invest in the Right Infrastructure and People

  • Staff must overcome differences in culture, organization, and terminology, and the basic challenge of finding the right contact within the partner organization with whom to liaise.
  • Disconnects within one organization can create problems.
  • To prevent problems, best-practice companies devote extra resources to their collaborations, particularly in the early stages of a new relationship.
  • Appropriate infrastructure for a successful collaboration begins at the top of the organization.
  • Execution of the collaboration should take place within the line organization and will ultimately form part of the everyday responsibility of the staff assigned to it.

• Establish a Joint Performance-Management System

  • An effective performance-management system helps a company ensure that any long-term project is on track and delivering the results it should.
  • Picking the right metrics can be challenging, it will involve trade-offs.
    • For example: the partners may have to choose between pallet configuration that’s optimized to suit a retailer’s restocking processes which will reduce in-store labor cost, and one that optimizes truck fill, which will reduce transportation cost from distribution center to retail store.
  • Keep things simple by picking the smallest possible number of metrics required to give a picture of the collaboration’s overall performance.
  • The real power of any performance-management system comes from this frequent, robust dialogue between partners.

• Collaborate for the long Term

• The final vital ingredient of a successful collaboration is stamina.

• Both parties need to recognize and build an appropriate long-term perspective onto their goals and expectations.

• Planning helps companies to break out of the short-term mentality that can limit the beneficial impact of collaboration.

• When companies take a long-term perspective, their collaborative efforts can become a virtuous circle. A greater understanding of each other’s capabilities, knowledge, and cost will often reveal new potential sources of value.

Supply Chain Diversification

• Supply chain diversification is a manufacturing business terminology used to describe the act on increasing choices for when to order what supplies from whom to bring products to the market.
• It is more about preparing one’s supply chain to be flexible for any kind of problem that the market throws at you.
• Each supplier must provide similar and/or equal products and be distinguishably competitive.
• It is necessary to educate the suppliers on what one expects from the suppliers and what one intends to do with the supplies.
• When doing business with multiple companies it is necessary to standardize one’s paperwork.
• Import and export regulations may become a hurdle for finding the right suppliers to diversify one’s supply chain.

Supply Chain Risk Management

• Supply chain risk management (SCRM) is the coordinated efforts of an organization to help identify, monitor, detect, and mitigate threats to supply chain continuity and profitability.
• Best practices for supply chain risk management:
  1. Automate processes involved in supplier risk management (SRM) to collect, analyze, and manage supplier information.
  2. Include supplier performance information in your analysis for insight into potential financial issues.
  3. Identify red flags that may indicate problems and use technology to automate their early detection.
  4. Integrate SCRM platforms with procurement and supply chain management (SCM) software systems.
  5. Provide dashboards that track and report on supply risk metrics.
• Approach to supply-chain risk management
  • Start by thinking about the known and the unknown risks
  • Known risks can be identified and are possible to measure and manage over time.
  • Organizations should invest time with a cross-functional team to catalog a full scope of risks they face.
  • Unknown risks are those that are impossible or very difficult to foresee.
  • Reducing the probability and increasing the speed of response of the unknown risks is critical to sustaining competitive advantage.

• Managing known Risks

  • Step 1: Identify and document risks
    • Map out and assess the value chains of all major products

• Step 2: Build a supply-chain risk-management framework

  • Every risk in the register should be scored based on three dimensions to build an integrated risk-management framework:
    • Impact on the organization if the risk materializes,
    • The likelihood of the risk materializing, and
    • The organization’s preparedness to deal with that specific risk.
  • It is critical to design and use a consistent scoring methodology to assess all risks.

• Step 3: Monitor risk

  • Persistent monitoring is one of the critical success factors in identifying risks that may damage an organization.
  • The recent emergence of digital tools has made this possible for even the most complex supply chains
  • Successful monitoring systems are customized to an organization’s needs, incorporating impact, likelihood, and preparedness perspectives.

• Step 4: Institute governance and regular review

  • Set up a robust governance mechanism to periodically review supply chain risks and define mitigating actions, improving the resilience and agility of the supply chain.
  • A cross-functional risk board with participants typically includes line managers who double-hat as risk owners for their function, giving them ownership of risk identification and mitigation.
  • An effective board will meet periodically to review the top risks in the supply chain and define the mitigation actions.
  • The risk board will also make recommendations to improve the agility and resilience of the supply chain, from reconfiguring the supply network, finding new ways of reducing lead times, or working with suppliers to help optimize their own operations.

Managing Unknown Risks

• By their nature, difficult or impossible to predict, quantify, or incorporate into the risk-management framework discussed for known risks.
• Mitigating unknown risks is best achieved through creating strong defenses combined with building a risk-aware culture.
• Building strong defenses