Reel in Risk with a Broader View of Supply Chain Flexibility

This is an excerpt of the original article. It was written for the May-June 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2015

As supply chain managers we are challenged year in and year out to figure out new, innovative ways to improve our operations. We have to translate educated guesses about what’s next into new investments in our processes. Such may be the case with robotics, 3D printing and additive manufacturing, and investments in new mobile technologies. However, successful planning, including planning for risk, resiliency, and flexibility, can help prepare you for whatever is next.

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It has become a classic example of the effects of supply chain disruption: the time when fire destroyed the premises of a supplier that provided Nokia and Eriksson with critical components for mobile phones.

The two companies had entirely different responses to the event, resulting in a dramatic industry shift. Nokia was able to secure components quickly from other sources. By contrast, Eriksson struggled to respond. The disruption not only cost the company several hundred million dollars in lost sales; it essentially ended its position as a player in the growing wireless phone business. Poor business continuity planning by Eriksson, combined with a lack of supply chain flexibility, turned a hazard risk into a strategic risk.

As the search continues for new and improved ways to manage supply chain risk, senior managers will put more and more of a premium on operations that are as flexible as possible. The concept of flexibility is receiving increased attention in the popular press as well as from supply chain professionals. A global supply chain survey conducted by PwC and reported in Industry Week concluded that almost 65 percent of respondents plan to implement greater flexibility to better respond to supply chain challenges, making flexibility a top supply chain priority.

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