Eighty five percent of companies with global supply chains experienced at least one supply chain disruption in the previous 12 months.1 Risk is inherently unpredictable. Fortunately, the current workforce is undergoing its own transformation to be able to identify and manage risk on a global basis.
For more than 35 years I have worked with companies and manufacturers around the world on supply chain related business opportunities. One thing senior executives of those firms all had in common was a relentless, positive perspective and motivation for improvements in the global supply chain. Risk management has become the pervasive mantra throughout the supply chain world, but as technology evolves the need for increased business agility is at an all-time high. As manufacturers continue to adopt more technology and become more sophisticated and global, not only do they become more vulnerable to risk, they also have more opportunities to manage risk.
Defining Risk Management
Senior executives across the board identify risk management as a key care about for their company, but the challenge is whether or not the company is truly prepared to identify and respond to changes in the marketplace, whether they be positive or negative. Because positive market changes usually advance a company’s growth, I believe that companies are most prepared for these types of changes, such as an acquisition/merger, introducing new products, or entering into a new market. But when you consider earthquakes, tsunamis, hurricanes, global terrorism, tainted products from foreign markets and economic events like the skyrocketing cost of oil, external risk cannot be denied. For example, in a Deloitte survey, 48 percent of executives said the frequency of risk events that had negative outcomes has increased over the last three years, while only 21 percent reported a decrease.2
Going beyond traditional risk management
The company’s workforce and extended value chain, including suppliers and customers, all need to be prepared for a level of “uncertainty” because effective supply-chain risk management is essential to a successful business. External risks are driving a new reality and trend in supply chain risk management. Traditionally, there used to be a drive towards simplification of suppliers and logistics. Now, it has been recognized where you must have a harmonized network that is constantly managed – especially when there is a risk incident. Today’s supply chain is anything but traditional, and it seems that managing complexity within your company is the new normal.
Business Agility and the Evolving Workforce
Manufacturing’s evolving workforce has also brought challenges and opportunities in regards to business agility. Modern manufacturing is evolving its workforce to be tech-savvy and highly-skilled throughout the supply chain. Today, the workforce handles new technology, and manages customers and situations that are no longer part of traditional manufacturing perceptions. Access to these new technologies helps create efficiencies on the shop floor, increases productivity and allows for better collaboration among the staff. But with these added benefits, comes added challenges. Advancements in technology bring different uncertainties that companies aren’t always fully prepared to handle – one threat in particular is cyber-security. When you apply a cyber-security threat to scenarios I mentioned above such as natural disasters, economic disasters or an acquisition, it’s important that the entire workforce is trained and prepared to handle such risks in a timely and efficient manner.
Being prepared and having the ability to be agile is the first step. Initially, companies need to implement a culture in their company that understands what risk is. It has to be pervasive. The culture has to inspire a staff that thinks about it day-in and day-out. Getting to a culture like this will take time and quality training.
When a company prepares their workforce with the skills to be prepared for risk, the training also needs to include the extended value chain including suppliers and customers. Having a successful risk management plan in place has no value if your staff is the only one prepared to implement it. The entire value chain needs to prepared and integrated, especially now that more companies are becoming truly global. This integration will prepare everyone to be able to respond quickly to a changing business environment and make critical decisions based on specific information. To efficiently implement a process where the staff can make critical decisions, companies are going to have to offer opportunities for open and global collaboration. The Internet of Everything (IoE) concept is particularly important in this situation in that more things, objects and people are continuing to connect to the Internet. This means with more things connected to the internet, companies will be able to be exposed to, and identify risk incidents more quickly and make decisions on how to respond in a timely matter. The Internet can give us the “real-time” information that we haven’t had access to in the past.
Now that more companies are taking advantage of the Internet of Everything, they need to make sure they are prepared with technology that can be virtual, expand and be adjusted when external support is needed to help the business.
As the manufacturing workforce continues to evolve, new challenges with risk management will arise. In addition to the business process and information gathered by technology, a major factor in terms of business transformation is based on the skillset of your staff, awareness of the board and the culture of the company to recognize and create risk awareness. As long as companies are prepared and confident in their workforce’s level of business agility the next focus must be security and how to make sure they are following processes to keep data and their businesses secure.
What risks do you foresee companies having to face next? Do you think they are prepared?
Robert (Bob) Dean is the Executive Director at Cisco responsible for building and leading the go-to-market strategies for the Manufacturing Industry Vertical in the United States, Canada, and Latin America.
“Supply Chain Resilience 2011.” Business Continuity Institute, November 2011.
“The Ripple Effect: How manufacturing and retail executives view the growing challenge of supply chain risk.” Deloitte, 2013.