Shipper — Whitepaper
In this ever changing world, it is imperative that supply chains be agile, flexible and resilient.
Disruptions can range from major supplier issues, port backlogs and hurricanes, to polar vortexes and yes, even the newest coined phrase, bomb cyclones. A study conducted by the University of Tennessee assessed the top 3 perceived supply chain risks to be quality, inventory and natural disasters. Forbes recently reviewed SCM World’s most recent Future of Supply Chain survey results which showed increased concerns of war, natural disasters and data security incidents. It is impossible to mitigate every risk a supply chain may encounter, but organizations can seek to minimize risk and make educated risk decisions. In this ever changing world it is imperative that supply chains be agile, flexible and resilient.
Schneider Supply Chain Management® (SCM) provides superior consulting, visibility and operational excellence to remove risk or minimize exposure if it cannot be avoided. You cannot predict how many Nor’easters may hit your supply chain, but you can ensure proper mitigation and agile recovery.
On August 26, 2017, Hurricane Harvey made landfall in Houston, drastically affecting North American supply chains. A major production plant for one of Schneider’s customer’s was in the direct path of destruction and became inaccessible for two weeks. This inevitably meant a shift in its production and inventory, changes to routing guides and complex logistical execution. During this crucial time, 25% of this customer’s supply chain network shifted and Schneider Logistics maintained an exceptional on-time pick-up and delivery of 95%. Schneider had a deep understanding of the customer’s supply chain to develop robust solutions and execute swift changes in business processes to safeguard service.
Risk and Insurance magazine notes that not one of 110 respondents rated their company as “highly effective” at supply chain risk management. “In fact the typical supply chain manager estimates that just 25 percent of his company’s end-to-end supply chain is being assessed in any way for risk.”
Companies that do assess risk use tools such as IBM’s Total Risk Assessment, Supply Chain Risk Identification Structure (SCRIS) developed by the Council of Supply Chain Management Professionals and the Risk Exposure Index from the Massachusetts Institute of Technology. These comprehensive tools help to identify, prioritize and ultimately mitigate risk. But this is not a one and done approach. Because supply chains are ever changing, these areas of vulnerability and quantification of risk should be evaluated on a regular basis. Gartner notes this should include “end-to-end supplier risk as part of the ongoing governance structure and continuous improvement.”
Once risks are prioritized, mitigation strategies can be developed and assessed on an ongoing basis. Common mitigation activities include:
Respondents are increasingly concerned about a variety of threats.
|War, terrorism, or other geopolitical issues||15%||19%|
|Natural disaster affecting supplier facilities (e.g. earthquake, flood)||18%||26%|
|Data security/IT incidents (e.g. cyber attacks)||30%||44%|
Schneider was performing a network optimization project for a healthcare customer when a tornado destroyed one of its distribution centers. Since this was a sterilized facility, all product was scrapped and it was imperative to begin fulfilling customer orders as quickly as possible. The customer had not assessed risk across the supply chain to develop contingency plans and needed a plan to mitigate the service inefficiencies and expected sharp increases in cost due to this natural disaster.
Schneider provided an operational plan within two days which included four scenarios. The customer’s initial plan would have cost $15.5M, a 37% cost increase. Schneider presented a strategy to change the location of order fulfillments which decreased the cost exposure for this customer to $1.5M, a cost increase of only 3.5%. In addition to moving forward with Schneider’s recommendation, the customer instituted a process to review and renew supply chain risks and mitigation plans on an annual basis.
Schneider helps customers assess and mitigate risk through:
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