February 06, 2015

The Menacing Task of Managing Supplier Capacity Risks

Jennifer Baljko

uphill-battleThere are a few things supply chain professionals dread. Like, that urgent call from a distributor about longer lead times for a critical part or talk that a third-tier supplier is filing bankruptcy or having to scramble for alternative sources of supply when a flood wipes out an important supplier factory.

It’s hard enough managing supply chain complexity on a good day. Add the ominous task of mitigating supplier capacity risks, and you could have a full-on nervous-making scene on your hands.

But, it deserves your attention. As Resilinc’s CEO Bindiya Vakil recently blogged, no company is immune to this risk. Companies the world over–and even of the likes of supply chain wonderhouses such as Apple Inc.–have been victims of supplier capacity shortfalls and part delivery interruptions at one time or another.

Additionally, a supply and demand mismatch in the aftermath of the Great Recession is causing headaches as well. Despite a pick up in demand, manufacturing capacity, which was cut in many sectors during the economic downslide, has not ramped up sufficiently. Many supply chain partners are either taking a wait-and-see approach to adding more capacity or have to contend with labor, regulatory or capital constraints. And, that’s adding significant pressure to the source, buy and make converations supply chain professionals are having today with suppliers.

Mapping Supply Chain Risks

While eliminating supplier capacity risks altogether throughout the entire end-to-end supply chain could be hard, if not impossible, there are ways to curtail their impact when then occur.

One key way is to define and measure supplier capacity risks. Having a tool or service that identifies supplier vulernabilities and proactively provides supply chain visibility to supplier practices and processes could give companies insights into existing and potential risks and lessen the impact of a disruption, Resilinc’s CTO and Co-founder Sumit Vakil pointed out in a recent webcast with Supply & Demand Chain Executive.

Additionally, companies that can identify challenges and expected benefits from developing and implementing a supplier capacity management solution will fare better than competitors in the wake of a disaster or crisis situation. Capacity management planning, for instance, helps companies address extreme product demand upswings, recover quicker when there is a supply chain disruption and optimize the market window for short-lifecycle products.

Another important step is to integrate supplier capacity management into their supply chain risk management strategy since they are so closely related. Companies that have a centralized repository of supply chain data, map multiple tiers of suppliers and have sense-and-respond capabilities will be able to assess capacity issues quicker, lower risks associated with those issues and ensure business and supply continuity.

By taking a few of these measures, you can start turning a menace into meaningful risk mitigation plan.


 Has supplier capacity risk management got you thinking about what-if sourcing and supply chain planning scenarios? Not sure where to start?

Resilinc’s CTO and Co-founder Sumit Vakil will offer tips for creating an intelligence-driven, proactive approach to long-term supply assurance at this month’s Global Supply Chain Resiliency Council session.

Click below to register for the February 25, 2015 event at the Hyatt Regency Santa Clara in Santa Clara, Calif.

Register Now

Topics: supply chain risk mitigation, supply chain risk management