A Strategic View of Risk in a Sustainable Supply Chain

image: 5 forcesUnforeseen, yet sometimes preventable, circumstances in the business world can sometimes put supply chains relationships at risk.  This prompts our sustainability consulting practiceto ask: Are you aware of the health of your suppliers and how they could be affecting your business? Are you aware of the potential cost and business risk they may be incurring though short-term or misaligned supply chain activity.   

“The ongoing economic uncertainty raises serious concerns over suppliers’ continued viability while events in 2011 clearly demonstrate that natural disasters regularly and significantly disrupt suppliers and supply chains. In addition to standard data assessments, progressive companies ensure that category managers develop good judgment about which suppliers represent a real risk to the business and challenge them to form their own conclusions about suppliers' health.”  -Procurement Strategy Council

Seeking insight from Ford Motor Company as an example detailed in a recent Wall Street Journal article, the automotive giant is reported to have monitored its suppliers for bankruptcy risk during the financial crisis.  Ford enlisted the help of a cross-functional set up resources to create a comprehensive perspective of its critical supply categories.

While many organizations targeted immediate value, some of the more well known leading organizations continuously assess the health of their supply base.  This provides for opportunity to immediately determine risk and ultimately capitalize on an eventual recovered market.  Aligned with Ford’s efforts, our sustainability consulting promotes sustainable supply chain practices that increase visibility into supply stakeholders by category.  Some of these areas of category focus include:

  • Strategy Assessment – Evaluate business needs, market conditions, and sustainability value drivers (research / benchmarking) to improve supplier relationships or initiating sourcing. 
  • Strategic Sourcing – Improve sustainable material selection and supplier manufacturing processes as part of supplier selection criteria.
  • Supplier Management – Establish key supplier performance metrics to ensure continuous alignment with sustainability targets and assess the overall health of these key business stakeholders.
  • Inventory Management – Integrating key suppliers in business process to optimize inventory levels on critical supply, resulting in lower carrying cost, waste and material obsolescence.

Within our sustainability consulting, we find common characteristics among sustainable organizations to be the ability to effectively manage the flow of information across key business stakeholder  relationships.  In fact, the true ‘business sustainability’ differentiators are those who understand and effectively manage their supplier and customer relationships.  As in the case of Ford, sustainable supply chain risk management is a key component of a business sustainability plan.

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