New Book Takes Aim at Supply Chain Risk
By following ten laws of risk management, companies can minimize the potential for disruptions in their supply chain. These and other tips on risk management are offered in a new book titled "Single Point of Failure" by Gary Lynch of Marsh Inc.
Frank Quinn -- Supply Chain Management Review, 11/4/2009
As their operations grow more global and complex, companies are becoming increasingly worried about disruptions to their supply chains. The big challenge they encounter, says Gary S. Lynch of Marsh Inc., is identifying the potential risks and then effectively managing them.
Lynch's new book, Single Point of Failure, sets forth ten "laws" of risk management that supply chain managers can follow to minimize the chances-and potential effects-of a disruption. Fundamental to all of these laws is a flexibility within the organization that allows it to quickly and efficiently deal with changes in the environment that threaten to disrupt supply chain operations. That's why the first law is "If you don't manage and lead change, you have to surrender to it," according to Lynch, who heads Marsh's Supply Chain Risk Management practice.
In doing the research for the book, Lynch interviewed more than 55 executives, representing both large and small companies in every part of the globe. "We saw a lot of concerns expressed about potential financial viability of suppliers and third-party providers," says Lynch. Yet overall, he believes that companies needed to expand their risk-management activities beyond these concerns by developing more comprehensive strategies that considered the impacts of one disruption on other business activities.
He cites leaders like Nike that have taken an aggressive and comprehensive approach to managing all aspects of supply chain risk. The key that enables companies like Nike to do this effectively is their view of risk management as a dynamic activity. "They have moved away from the static view of risk management," Lynch says, noting that this approach limits the ability to anticipate disruptions and respond effectively.
What can supply chain managers do within their own organization to become better at managing risk in their supply chain? Lynch suggests that a good starting place is to identify a single product or sku that has the most value for their organization. Then carefully track the flow of that product across the whole supply chain, upstream and downstream, to pinpoint potential failure points and gauge the related impacts on other activities in the supply chain.
"This enables you to see potential risks, measure them, and then develop mitigating actions," the Marsh executive says.
More information on Lynch's new book on risk management can be accessed at http://global.marsh.com/risk/supply/
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