The result of this phase is a categorization and scoring of the risks by occurrence probability versus impact (such as COSO risk categories). (See Figure 4.)
Phase 3 — Implementation of Supply Chain Risks Management Plan:
The supply chain risks management plan is evaluated in terms of solutions-suitability, cost-efficiency and ease of implementation. Implemented measures and options should cover major identified risks, including a response and crisis communication plan, risk transfer and sharing options, sourcing risk mitigation strategies (multiple supply sources, supplier collaboration, sourcing opportunities etc.), enhanced business rules to mitigate risk and supply chain reconfiguration options to limit disruption.
Phase 4 — Risk Mitigation:
Finally, this phase brings an answer to how the major risks can be controlled, mitigated and monitored. The risk mitigation includes drills of the supply chain risks plan to ensure the company's readiness and, also, a series of metrics to monitor the risks levels to anticipate as early as possible the risk occurrence. (See Figure 6.)
The financial consequences of a product recall are colossal, and the persisting damages spread rapidly beyond the company's boundaries, affecting severely its environment, from suppliers and customers to the industry and even the country.
With minimal anticipation, these tragedies can be avoided with a robust risk mitigation plan, which could be built with a proven methodology of supply chain risk management such as SCOR 9.0.
Product recalls are only one of a series of risks that could disrupt a company's supply chain, however, so to be effective the supply chain risk management should integrate any potential risks from supplier's failures to natural disaster or terrorist attacks.
Finally, the real challenge for today's companies consists of integrating risk management into the configuration of their supply chains and, more broadly, in all strategic decisions.
About the Author: Frederic Gomer is a senior supply chain consultant at iCognitive, a consulting and research company that specializes in Supply Chain Management. On the Web at www.icognitive.com.