Making Supply Chain Resilience Possible
Organizations often sacrifice supply-chain security for efficiency — but they can have both.
With the rapid growth of outsourcing to partners and suppliers around the world — and the increased reliance on sole sourcing — supply chains have become fragmented and brittle. Organizations naturally want their supply chains to be resilient. The trouble is that the measures that bring supply chain resilience, such as buffer inventory, redundant sourcing and continuity planning, are often sacrificed for speed and efficiency.
Booz Allen Hamilton believes those kinds of tradeoffs do not need to be made. By taking a holistic approach to resilience, organizations can effectively plan for risks throughout the entire supply chain — and still meet their business or mission goals.
A study by Booz Allen, Prepare to Bounce Back: The Importance of Incorporating Resilience into the Supply Chain, details a four-step plan for an effective risk-management strategy.
Anticipate the risks: To establish a comprehensive risk inventory, stakeholders from every point along the supply chain — procurement, manufacturing, distribution, marketing — need to be brought together to understand how their functions are integrated. Booz Allen has found that one particularly effective approach is the use of wargames, or scenarios, to uncover hidden supply chain risks.
Assess the risks: Uncovered risks should be analyzed in terms of both their likelihood and their potential damage to the supply chain. Physical topology models, which depict the links between supply chain systems, processes and infrastructure, can dramatically illustrate interdependencies that may not be obvious.
Act against the risks: Organizations often take specific actions, such as holding more inventory stock. However, Booz Allen has found it is more effective to focus on overall risk-management goals, such as maintaining the organization’s operational agility.
Adapt the supply chain: Often, organizations fail to make risk-management plans living documents that are revised when new threats, such as pandemics, arise. Resilience strategies require regular review and updating, and sufficient resources to make that possible.
Another critical finding in the study was that to achieve true supply-chain resilience, Organizations must have an organizational culture that understands and accepts the importance of resilience —otherwise there may not be enough buy-in.
The study was prepared by Booz Allen Vice President Joseph Martha and Booz Allen Senior Associate Jean Lewis.
study posted July 1, 2009
