Enterprise today thy have to reach beyond local, regional and national in order to establish supply chain that will keep product quality high and business cost object. However, depending on supply chain there are lots of risk associates with. Achieve Excellency on Supply chain management is an ongoing process. There is no 100% proven formula to achieve it overnight. Big organizations like Manufacturers, Financial institute and pharmaceutical companies are adopting best practices in to their supply chain management process gradually. In this article I will focus 6 thing that you have to know to establish efficient supply chain management (SCM) system.
1. What is supply chain management?
Supply chain is the bones and muscles of a company. Without it, company cannot provide its goods or services to the end consumer to earn profit. Before some bookish definition I like to give you an example of a company who sale Drinking water. What need to product drinking water? A plastic Bottle and Water. But is it all they need? Obviously no. Company need to Produce Plastic bottle or have to have bottle supplier. They Manufacture the bottle or buy it from supplier. Then they need to store it in warehouse. To maintain warehouse energy, manpower, security, ERP etc. needed. Now come to Water. Water need to be purified. So it require purifying machine. They need label to name of the product. Then they need truck for shipment. They need some advertising to promote product. These is not the all. There are many more things need to be added and associated with the process until the product or service consumed by end user. So we can say
Supply Chain Management (SCM) is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
2. What are the risk in Supply Chain Management (SCM)?
Management have to consider and take necessary steps to mitigate all risk factors because these are directly related with
- Company reputation
- Shareholder value
There are several types of risk associated with Supply Chain Management (SCM).
- Natural Disaster
- Political issue
- Power outage
- Cyber attack
3. How is responsible for these risk?
Traditionally Chief Procurement officer (CPO) was responsible as he was the decision maker for selecting procurement source. Now a days Chief Risk Officer is a newly introduced post has been created who shares the responsibility with CPO.
4. Why risk factors are increasing?
Initially Supply Chain management was processed in a secure place. But in the age of globalization, lots of parties and process are associated with the process. Due to these complex process significant amount of volatility within a Supply chain management system take place.
Following example may be helpful for you to understand the risk calculation process.
In a Supply Chain Management (SCM) there are three process:
Process number 1 Risk 10%
Process number 2 Risk 10%
Process number 3 Risk 10%
So in simple word we can say there is 10% risk associated with the whole process. But it’s not true. It should be calculate like below
0.1X 0.1X 0.1 = .3
There are 30% risk associated with the process
5. Why business owners are much careful for cyber-attack?
not free from threat. In past individual hackers performed those cyber-attack just for personal interest. But as and when financial transactions start taking place in online environment, not cyber-attack became more civiler. Especially Financial institutions, Ecommerce sites, technological companies are main target for this kind of attack. On the other hand End consumer often been attacked. Now a days Cloud and Mobile also increasing the variability.
It is becoming a burning question because, it can be done from anywhere of the world and there is really no 10% proven remedies. Law also not very straight forward and jurisdiction is a big problem.
Big organization can recruiter good webmaster to protect attack but for mid-size company, it’s really a big problem
Knowledge is the key for tackle these kind of situation. Need to know 360 of the process. So that GAP can be identified. Following steps are recommended to medicate the risk
- Improve suppliers visibility
- Improve Disaster recovery plan
- Alternate Supply channel
- Ensure secure infrastructure of supplier
- Identity the roles and responsibilities clearly
To understand risk medication process, you can also read this article.