Yesterday’s post on National City Corporation’s  supply risk management approaches generated significant interest from Supply Excellence readers, several of whom asked for tips on how to assess and mitigate supply risk.

Jane Wanklyn, Director of Knowledge Management at A.T. Kearney Procurement Solutions offered the following advice earlier this week at the Supply Management 2.0 Forum in New York: “Procurement must ensure that supply continuity is represented in the overall corporate risk management strategy.” According to Wanklyn, key things for supply managers to consider include:

• Category segmentation will be important to define commodities which are strategic and therefore merit well-developed risk management strategies.
• Potential suppliers should be pre-qualified well in advance of selection.
• Dual sourcing strategies and product substitution plans should be considered for all key categories.
• Key risk indicators (KRI) should be identified and risk levels monitored.”

In a post presentation Q&A, a supply management executive in attendance was concerned about the effort to apply such procedures. “How far down the supply chain must we go to monitor and manage risk? I just don’t have the resources to do this with every category.”

Wanklyn and other panelists emphasized that that was the point. It isn’t practical to assess risk and contingency planning across all tiers of the supply chain for all categories. You need to determine what are your most strategic and most at risk categories and apply these approaches to those.

In short, when it comes to supply risk management, it’s better to do something than nothing at all. Too often enterprises get analysis paralysis, fearing that they lack the resources or skills to effectively assess and manage supply risks. But the costs of not doing anything are too high. (And getting more costly every day.) Instead of fearing risk, embrace it.

To get started, take a page from Sun Tzu’s Art of War: divide your supply base into strategic and risk sectors; and establish ample risk assessments and contingency plans to conquer risk in those sectors.

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