Given the wide diversity of supply chain risk that most companies are exposed to, shouldn’t we be thinking about just who in the organisation should be responsible for keeping tabs on it?
Supply chain risk exists in many varied forms. Damage to revenue may be inflicted by transport disruptions, natural disasters, strikes, political unrest – all of which may interrupt supply of product to the consumer or components to the factory. For these forms of impact to the supply chain, a logistics or materials operations management role might be considered an appropriate position to monitor and respond to such issues.
However, risk within the supply chain exists, too, with regards the way suppliers behave and run their businesses.
Non compliance to Health and Safety requirements, poor Corporate Social Responsibility policies, a lack of attention to quality and, in the present harsh economic conditions, a supplier’s potential to fail financially, may all impact a buying organisation’s revenue and, perhaps, most critically, may cause huge damage to corporate or brand reputation.
For these issues, which arise from a buying organisation’s relationship with its suppliers, it would appear more appropriate for someone in a procurement role to be responsible for monitoring risk.
Clearly, understanding and mitigating supply chain risk needs to be recognised as a critical activity within the business and, therefore, should be signposted as such from the most senior level – the board. Creating a culture where risks are mapped, measured and balanced is an important step to creating a robust supply chain that is capable of serving the business well and protects the integrity of its corporate reputation.
The problem for most organisations is that risks within the supply chain often fall between different functional silos. Some may see responsibilities residing in procurement, others perhaps, in logistics. In some organisations where supply chain encompasses procurement and logistics a central, co-ordinated approach to supply chain risk may be possible. But in general, different departments have different responsibilities and this lack of co-ordination can introduce risk.
Enlightened companies that recognise the role their supply chain has on the performance of the business have supply chain directors on the board. Surely, this is where responsibility for supply chain risk should ultimately reside. The issue is, we need more supply chain people at board level.