A.T. Kearney Issues “Pragmatic Approach to Supply Risk Management” Study

A new study released recently from global management consulting firm A.T. Kearney promises to provide supply chain managers valuable advice on risk mitigation

Is Your Luck Running Out? Managing Supply Chain Risk in Uncertain Times, notes that today's supply management leaders have secured their position as a strategic business function by focusing on high-impact, high-visibility activities. However, managing risk has fallen to the bottom of the list of priorities, say analysts.

As a result, supply chains are often one issue away from a major disruption. Overlooking risk management—or, rather, getting by with a strategy of “hoping our luck holds out”—leaves procurement organizations especially vulnerable in today's tenuous geopolitical and economic environment, where many public and private companies are in precarious financial positions.

The study was co-authored by Rapid Ratings, a ratings, research and analytics firm, and focuses on how organizations can quickly ID, diagnose, and resolve these issues. Interestingly, social media reveals significant chatter on the topic of supply risk.

A global analysis of mentions about supply risk in more than 23,000 social media posts in 2015 reveals the topics that were top of mind: climate change, IT, sustainability, commodities, and the regulatory environment. Within the topic of climate change, more than half of the posts related to energy.

Carrie Ericson, vice president, A.T. Kearney, told SCMR that the most surprising finding was the level of latent risk in supply chains globally and the recognition of that risk by supply chain managers.

“Even with this understanding, the findings demonstrated an ongoing struggle to ‘mount a solid defense’ and build a sustainable program to proactively mitigate that risk,” she said.

Analysts add that much has been written about supply management's broadening of responsibilities over the past decade. These new activities include collaborating with internal stakeholders to define business requirements and priorities to be fulfilled through the supply market, identifying top-tier suppliers to partner with in order to develop more attractive products and services, structuring third-party relationships to ensure they are market competitive and deliver value year over year, and managing risk throughout the extended supply chain.

Although many organizations are now delivering top- and bottom-line value with their strategic supplier relationships, even the procurement leaders have struggled to manage the latent risk in their extended supply chains, say industry analysts.

Most cite lack of bandwidth and budget as the biggest roadblocks. Dedicating scarce resources to prevent or minimize the impact of an issue that might never occur is often not a priority.

The report concludes that what's needed is a layered, pragmatic approach that uses the best available tools to filter out information noise, capture valuable information, and create powerful insights “long before the luck runs out.”

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