Nearly every major company experiences one or more significant supply disruptions each year. Despite an extensive focus on supplier risk management by many companies, these costly surprises remain a top management concern. Efforts focused on even intensive supplier collaboration have failed to protect companies from supply chain risk.
Therefore, businesses need to be prepared to react to changes in the environment. These could be business related such as changes in demand, raw material price, transportation costs etc. or related to weather, supplier performance, personnel and many more.
Companies need a two fold approach to address these problems - first deploy strategic improvements to companies with respect to supply chain flexibility and complement them with operational transparency. These leading techniques ensure that a firm's supply chain is as resilient as possible by reducing the impact of disruptions and ensuring that adverse trends are identified and resolved earlier so that supply disruptions can be minimized or avoided altogether.
There are many strategies that can be used to reduce risk: Adding alternative suppliers, increasing production flexibility in the plants, increasing flexibility in sourcing to the plants and adding inventory. We have developed methods and optimization technology to address the most cost effective way of doing this.
The second part is the operations transparency required on an ongoing basis. For this we propose the "Control Tower" which combines three important capabilities to create a predictive supplier management approach.
1. Early detection of problems - Monitor KPI's and policy violations across the supply chain to detect adverse performance trends early
2. Rapid resolution - Near real-time alerts and corrective action requests to ensure rapid resolution of the performance risk
3. Continous improvement - Root-cause analysis of problems to improve trend detection and problem resolution techniques