June 02, 2015

Defining Supply Chain Risk Management Program Objectives

Wayne Caccamo

Supply Chain Risk Management Business DriversIn the Ultimate Guide to Supply Chain Resiliency Program Success, we provide supply chain risk management practitioners with concrete suggestions and guidance on how to create, roll-out, and institutionalize a global supply chain resiliency program (SCRP). As part of the “PLAN” phase we discuss the need to describe the strategic context and influences by describing the key business drivers. Key supply chain risk management business drivers we identified include:

  • Supply chain networks are larger, leaner, more global, more interdependent, more complex, less transparent, and changing more frequently.
  • Customer expectations continue to grow.
  • Commodity costs are increasing.
  • Logistics capacity remains constrained.
  • Natural disasters impacting globalized supply bases are on the rise as a result of global warming.
  • Brand risks are increasing as a result of supplier compliance, corporate social responsibility, and security practices.
  • New product introductions have been more frequent.
  • Products and services have become less standard.

I would love your input on this list. What am I missing? I am particularly interested in the drivers that are unique to your industry, geography, company scale, or other business context.

The next key step in the supply chain risk management program planning process is to identify your strategic and tactical objectives. In the Ultimate Guide we identified the following potential strategic and tactical objectives that can be used as a starting point for brainstorming. Again, what is missing? We all need to hone our collective ability to make the business case for investing in supply chain risk management strategies, processes, and tools. So, this is my attempt to crowd-source your input.

Sample Strategic Objectives

  • Achieve competitive advantage (turn business disruption threats into opportunities)
  • Protect brand value and customer satisfaction (based on customer service level data)
  • De-risk revenue and time to market goals
  • Decrease operational costs
  • Protect shareholder value
  • Ensure continuity of supply through a controlled, predictable response
  • Manage regulatory/compliance exposures

Sample Tactical Objectives

  • Decrease supply chain-related insurance premiums
  • Facilitate supplier collaboration and information sharing
  • Avoid supply chain costs (e.g. component buy-aheads, emergency second sourcing, expedited freight, etc.)
  • Reduce inventory
  • Improve supplier quality
  • Improve lead times and variability
  • Improve delivery/order fulfillment performance (on-time, variability)
  • Reduce number of supply crises impacting critical products or parts
  • Reduce incident response times and time-to-recover for the highest priority supply chain activities, products, and services
  • Improve supply chain asset utilization and inventory turns

Here’s some parting advice on developing your own list of strategic and tactical objectives. First, aim for strategic and tactical goals that are ambitious, yet achievable. Second, ensure program strategies drive or support C-level corporate strategies. Don’t forget to consider tactics that may be viewed as transformative (i.e. fundamentally change the way supply chain risk management processes are performed today). Make sure you package strategic objectives and tactics into a simple statement of purpose and goals that can be easily shared and understood. And, finally, position SCRP purpose and goals as complementary and accretive to existing enterprise risk programs.

To learn more about how to how to build out a global supply chain resiliency program (SCRP), check out the Ultimate Guide.

ULTIMATE GUIDE TO SCRM SUCCESS

Topics: SCRM Best Practices