Volume 21, Number 2 Article by Janat Shah June, 2009
Supply Chain Risk Management: Discussion
Global supply chains are key in managing businesses successfully in today's borderless world. However, global supply chain management is a tough challenge involving the mitigation of complex demand and supply side risks in an environment characterised by high uncertainty. As part of the IMR Conference 2008 on Global Supply Chain Management: Role of Emerging Economies, an invited panel of industry experts shared their approaches to risk management and mitigation. The discussion paper is preceded by an academic perspective by the anchor Prof Janat Shah, which highlights the research findings on the subject.
Supply chain,formerly a linear function handled by purchasing heads is now becoming part of organisational strategy, observed Mr Tobby Simon, CEO, Synergia. 'Smart innovation' or a company's ability to reengineer supply chains and bring an idea to the market in the shortest time can create businesses that are highly profitable and resilient, Tata's Nano being an example. Side by side with their increasing centrality, global supply chains are becoming vulnerable to uncertainties in the global financial and currency markets,to piracy and network disruptions,which have an adverse ripple effect on companies the 2008 submarine cable disruption which caused Internet disruptions in the Middle East and India being a case in point.Future challenges to the global supply chain could come from the clash of national interests over scarce resources, attempts to control communication networks, and so on, in meeting which opportunities could reveal themselves.
Mr Suprakash Mukherjee, Senior General Manager, Global Sourcing, John Deere Technology Center, summarised the risk associated with the manufacturing and engineering industry under four major heads: supplier risk, geopolitical risk, logistics risk and commercial risk. Supplier risk is addressed by assessing a supplier's capability using strategy-driven assessment criteria before developing a long term relationship. The key is relationship building and how the company and the supplier will work together with respect to values and business. Commercial risk is mitigated by sharing the risk with the supplier.
The end to end supply chain processes in Bharat Petroleum Corporation Ltd (BPCL) include the purchasing of crude and maintaining a feedstock supply,refinery production management, distribution, depot management, secondary freight and customer management processes fraught with uncertainty and risk. Further, as Mr B K Datta, Executive Director, Supply Chain Optimisation, BPCL explained, 70% of the crude is imported representing 90% of their moneys, making the quest for security continuous. BPCL uses a four-pronged strategy to manage these complexities which consists of managing business process, technology, distribution and management, and people. Collaboration between different businesses is underscored and the supply chain is the means to bring corporate wise integrated planning to all units and processes, as embodied in one single financial calculation.
For EADS, a company that operates in aerospace and defence, manufacturing a range of aircraft, the nature of its operations necessitates a complex supply chain, in which global sourcing is key. According to Mr Harvansh Batra, Director Sourcing India, EADS India, the four parameters of global sourcing for EADS are: value for cost, market access, access to resources and risk management, and supply chain risk ranks high in a high tech industry like theirs. Supplier relationship management forms an important part of the EADS sourcing strategy and this includes categorising, evaluating and developing suppliers with the view to developing strategic partners with whom risks and opportunities from the end customer market are shared.
Aspects such as the philosophy of risk management in organisations and how it translates into operations, enterprise risk versus supply chain risk, the collaborative sharing of risk and the areas of risk specific to emerging economies, came in for extended discussion.
Reprint No 09206a
