Supply Chains: Mitigating Risk and Minimizing Consequences.

you can control risk, not uncertainty.

[Deliverable] A risk-mitigation plan must be implemented to address current issues within the global supply chain. Unfortunately, haphazard planning and tenuous strategy are the cruxes of most failed supply chains — notwithstanding anomalies, such as the Covid-19 pandemic. Therefore, after consideration, it could be conjectured: that no matter how well-adjusted the supply-chain forecasting model is trained, uncertainty is certain to exist.

Though some perils of the supply chain are caused by unforeseen uncertainty, many of the nuances can be mitigated by the supplicant implementation of Q.O.S (Quality of Service check-sums) and risk management schema.

Strategic Risk Factors Include:

• Lack of Quality Service Protocol and systemic risk management processes.
• Changes in Domestic and foreign regulation (BREXIT, E.U regulations, trade disputes, and import/export duty.)
• Variability in raw material prices. (For example, new markets entrants and industry effectuate an increase in raw material pricing.)
• Labor Issues (labor unions, collective bargaining, etc.)
• Net present value and future value of supply chain outflows.
• General economic issues, especially when economic policy meets liquidity issues (recession, stagflation, and expansionary policy.)
• Potential supply risks in higher-risk places (For example, nuances associated with B.R.I.C nation-states.)
• Supply chain data efficacy and protections, including initiatives to reduce information flow dissonance and data breach protocols *(Intellectual property, end-user information, and business are tradable assets and should be protected accordingly.)*
• Lower aggregate demand for products manufactured. (The phenomenon is often consequential of ineffective operations and inefficient supply-chain logistics.)
• Business interruptions (nation-state attacks, trans-oceanic conflict, tariff/border issues.)

Seemingly organizations that leveraged unilateral manufacturing relationships have realized decreases in manufacturing output after the Covid-19 pandemic onset [1], wherein the risk-averse supply policy reduced aggregate supply interruption. To persist punctual product delivery and consistent quality, it is recommended to incorporate a product-quality testing procedure and risk mitigation policy into the organization’s S.O.P (standard operating procedures). The risk-based assessment is a systematic product-manufacturing schema where organizations weave flexibility into the supply chain processes. The SOP should also adhere to the product-manufacturing requirements. Moreover, it is advisable that organizations heed a risk-based qualification assessment for product-manufacturing consideration in the SOP. The premise of vendor selection should be based on product requirements, economic developments, and vendor-specific risk factors. Additionally, product testing and manufacturing predictive modeling should be executed and dully documented on a product case-by-case basis, thus resulting in leverage for supply-crisis-management and predictive modelling.

Suppose there is a shortage in electronic silica components –and suppose there was an alternative to my component, where the raw material (silica) can be replaced. Within this context, I would advocate that supply-chain modeling would necessitate proactive reevaluation. Failure to proactively resolve supply-chain issues would incur operational and production costs for the organization. A net negative in overall production, or a decrease in quality rendered — would offset sales and could catalyst a liquidity crisis — especially given the Fed’s projected monetary policy. [2] Therein, results from prior data-aggregation efforts should impart communication channels where predictive modelling could perhaps be shared amongst departments, thus mitigating uncertainty .

Adel Al-Aali

Sources

[1] Mickensy Co.: Supply-Chains to Build Resilence Manage Proactively https://www.mckinsey.com/business-functions/operations/our-insights/supply-chains-to-build-resilience-manage-proactively

[2] Fannie Mae: Inflation Rates Signals Tighter Monetary Policy and Threatens ‘Soft Landing.’

Inflation Rate Signals Tighter Monetary Policy and Threatens 'Soft Landing'

[Scenario]
Put yourself in the role of a CEO of a company with a global Supply Chain. Based on the critical importance of having an effective Supply Chain, discuss what issues going on in the world right now will have possible impacts to your Supply Chain and how can you mitigate that risk?