How does your company approach risk in the supply chain? For many companies, risk is considered after the fact—a facet of problem solving, rather than a guiding principle in supply chain strategy creation. But what happens when you put risk front and center in not just your supply chain planning, but your business strategy?
Supply chain risk management has, historically, been the purview of managers who have been focused on streamlining processes within the supply chain. However, a company that has a dedicated risk management professional who has insight into how “leaps of faith” impact not just the supply chain, but the company as a whole is uniquely positioned to leverage risk.
Bringing the Boardroom to the Playing Field
The inherent problem with collaboration between two nodes of a company—in this case, the executive suite and the warehouse team—is that each representative is biased to support his or her own network.
For a decision-maker that's spent little time, if any, on a working fulfillment floor, going with a lower bid options on pallet division and shipment (which complicate in-house processes) may be an easy choice—the numbers are right there for all to see. For warehouse managers, the intricacies of an ongoing vendor partnership would likely take a backseat to making shipments more reliable or easily scanned. In both cases, one individual is making "no brainer" decisions that are, in reality, short-sighted.
The solution, according to Carlos Alvareng, isn't to give a supply chain professional a crash course in executive decisions, but rather to bring an executive with risk management skills into the supply chain strategy process.
Smart Risk-Taking and Fallout Preparation
Ideally, every risk pays off, but the rigors of business can be a harsh teacher. When a member of the executive team knows exactly what his or her company is risking, and has a direct hand in that process, the company as a whole is better braced to handle a negative outcome. Rather than a supply chain manager struggling to explain a dip in productivity or an over-budget project to a disapproving board, everyone is on the same page and ready to move forward with the next opportunity without dwelling on blame.
As Bonnie V. Hancock and Mark S. Beasley note in an article for the Journal of Accountancy, placing a financial officer in this position amplifies this collaborative outcome even further, as a financial officer is more equipped than other executives to determine calculated financial risks that won't put the company in a difficult spot.
Reports and data are the fuel that drives business decisions in the C-suite: the ability to make timely reports on any given data set is critical for good decision-making. With an insider making risk determinations on the proverbial front lines, the C-suite will benefit from receiving reports geared to their own workflow and takeaways, rather than a glut of data compiled by a supply chain professional erring on the side of caution. A crisp snapshot of how each outcome will affect the overall company is considerably more achievable with a leader that understands how the operational and fulfillment sectors interact in the quest for success.
Stakeholders will also benefit from more robust oversight of risks and more frequent updates, thanks to the placement of a stakeholder advocate at the strategy planning table.
Supply chain strategy will always be a collaborative effort, regardless of who is positioned as the lead decision-maker. However, if an executive member lends their services, advice and insights to the process, the chance of unexpected outcomes virtually vanishes, and more holistic supply chain decisions become a reality, rather than a goal.