Following legal issues related to supply chain management.


Tuesday, November 18, 2008

New article spotlights role of risk management in supply chain matters

Most people would agree that risk management is a vital component to successful supply chain management. However, a recent survey of supply chain manager found that none rated their current risk management system as "highly effective." Only 35 percent rated their risk program as "moderately effective," meaning that more than two-thirds of surveyed companies find themselves without a sufficient plan to meet unexpected contingencies.

The current issue of Shipping Digest has an excellent article on the role of risk management in protecting supply chains.

The article spotlights the excellent response Cisco Systems had to a massive earthquake in China earlier this year. Cisco has made risk management a point of emphasis and that diligence paid off during the earthquake.

Risk mitigation often makes company leaders cringe. After all, it is an "all expense/no return" investment. Unless, of course, you happen to need it - at which point it becomes invaluable.

In addition to working directly with your vendors and customers to coordinate disaster recovery planning, supply agreements need to reflect this planning and implement risk mitigation techniques on a consistent basis. Too often, a company has hundreds of different agreement so that when a disaster hits, management must spend far too much time just figuring out what each vendor or customer agreement requires, rather than focusing on risk mitigation.

After reading this article, prudent supply chain managers will undoubtedly be inspired to collaborate with their internal and external risk management professionals to examine potential legal, accounting and insurance risks. A risk assessment audit with experienced supply chain professionals can help you identify and correct areas of weakness before they become a problem.

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