Analysing risks in operations.
The disruption caused in the north east states of America by the super storm once again illustrates how vulnerable are long supply chains. An integral part of senior roles in supply chains and logistics is to have answers for the ‘what-if’ questions concerning business risks.
The areas of vulnerability for your business can be identified under four headings: strategic, financial, regulatory and supply chains. Within your supply chains, there are four operational vulnerabilities: availability of supplies, access to physical resources, flow of data and people availability.
Availability of supplies becomes more critical the longer your supply chains. Review your inventory policy concerning location and investment in inventory items; also your inventory planning replenishment rules and how quickly they can be changed. Identify by material group the likelihood and consequences of disruptions. Following the recent American storm, it was reported that a large CEP (courier express parcel) company had addressed the requirement for emergency fuel inside its sorting facilities but not the fuel for its delivery fleet. It is likely they assumed that in an emergency oil companies would meet the need for fuel, but this was not to be.
Associated with questions about supplies will be access to physical resources, mainly addressing storage facilities and the requirement for emergency power; also transport assets. Even if you have outsourced distribution to a 3PL, what are their plans in the event of a disruption?
Flow of data enables your business to access information. In a business concerned with goods, it is likely that more than 70 percent of your data is concerned with the movement and storage of items, so how will these activities continue to access and use data and information?
People availability addresses not only the access of people to your facilities (and maybe accommodating them) but also how staff such as planners and schedulers can work from home or other remote location.
The analysis of risk will continue to grow in importance as an element of senior roles in supply chains – how prepared are you?