Regardless of size, industry or market, modern for-profit businesses typically share two common characteristics: a goal of providing superior and consistent customer service while increasing revenue and margin; and a heavy reliance on their supply chains to meet this performance benchmark. This is why it is crucial for today’s supply chain professionals to support and protect this competitive asset with a proactive multi-tier supply chain risk management program.
Risk is inherent in every supply chain—a supplier fails to deliver according to contract, forecasts miss the mark, customers change their minds—these are just a few of the basic risks businesses deal with every day. Now, add hurdles that arise from globalization, outsourcing and emerging markets—such as economic, geo-political, regulatory, environmental, quality and reliability, demand volatility and increased threat of natural disaster. What you have is an extraordinarily complex supply chain that could easily break under all the pressure. But, a best-in-class risk management approach can enable even the most complicated supply chains to not just survive, but thrive, amid the many perils of global business today.
Define & map your strategy
Establishing a baseline definition of risk management is a good first step in the development of your supply chain risk strategy. According to the ISO 31000 standard, risk management is the identification, assessment and prioritization of risks. A risk management plan is then designed to control exposure to risk or reduce its negative impact on supply chain performance.
While there is no one-size-fits-all supply chain risk management strategy, Avnet recommends that our partners follow the same five-step process we use internally: identify, analyze, plan, act and track/control (see infobox for details).
Since the supply chain is intrinsically collaborative, the process of identifying, assessing and prioritizing risks within the supply chain should, ideally, also be collaborative. When players—from a raw materials supplier to an end-product/service provider—actively manage the vulnerabilities within their particular portion of the ecosystem, supply chain risk can be significantly mitigated. When they don’t, a relatively minor disruption can easily turn into a major crisis.
Communication and transparency of information among trading partners is key to this collaboration. Yet, despite increased cooperation among supply chain participants, visibility, particularly beyond Tier I suppliers, remains the most common barrier to creating an effective multi-echelon supply chain risk program.
A time for change
To change that within the electronics supply chain, Avnet created a new “Control Tower” offering. Part of Avnet’s Enterprise Risk Management strategy, the Control Tower is led by Chief Logistics and Operations Officer (and SDCE 2012 Pro to Know) Gerry Fay to provide visibility through multiple tiers of the supply chain—both upstream and downstream.
As a distributor, Avnet has the advantage of being uniquely connected to the full scope of participants within the supply chain—from our component suppliers’ suppliers to the various manufacturing and integration providers that may come into play throughout the production process to our eventual customer, the OEM. Douglas Kent, Vice President, Avnet Velocity, pointed out that the function of Control Tower is to serve as a collaborative execution-based hub for all the supply and demand data Avnet collects from these different players. Members of Avnet’s extended supply chain can access this information and use it in the event of a supply chain disruption to quickly assess the situation with visibility into the status of each player within that supply network. Examples of the kind of information that can be found through Control Tower include demand forecasts; channel inventory; SKU level sell-out; WIP inventory; shipping data; and purchase orders.