There's a new awareness among top executives of the importance of managing supply-chain risk, says Kent. Problems can appear anywhere in the supply chain, and companies are realizing that they can't restrict their risk-management efforts to Tier 1 suppliers.
Globalization is a major factor in the increase in supply-chain risk. As companies chase low labor costs around the world, they find themselves working with partners with whom they are unfamiliar. In addition, they must deal with a variety of ever-changing regulatory environments.
At the same time, manufacturers are struggling to reduce inventories in order to reserve limited working capital. As a result, "when there is a glitch, it can be quite severe," Kent says.
One key to understanding the nature of risk today lies in achieving better visibility of critical supply-chain data. Only then can companies ensure a measure of predictability in their operations, Kent says.
Supply-chain managers must balance predictability with agility, the latter a necessary quality for coping with the inevitable problems that crop up in global supply chains.
As they approach the question of risk, companies today are increasingly realizing the importance of supply-chain segmentation, by markets, regions, customers and products.
It can be tough selling top management on a value of a risk-management program. "Cost avoidance is a much more difficult sell than cost savings," says Kent. Still, he says, "we are making some inroads." The supply chain and finance communities are working more closely together than ever before.
