Natural risk behaviour

What is the company behaviour to risk and danger? Natural disasters in last years have made companies more and more aware of supply chain risks. The earthquake and the following tsunami in Japan made clear where risks of supply of components especially in the high-tech industry lays. A company needs to know that when a natural disasters occurs if it hurts their supply chain. Upstream supply chain visibility is a definite requirement to know where vulnerabilities lay.

According to a recent survey by Garter analysts supplier visibility focuses on reducing business risk and the need better for lead times. But there is a difference between supply chain status information from a company’s direct suppliers (Tier 1) and from Tier 2 and Tier 3 suppliers. Supplier engineering and quality-related events doubled the need for status information at Tier2/Tier 3 compared to Tier1 suppliers. Additionally, Gartner sees government legislation and regulation increasing more upstream for the “secure” supply chain , which will drive the need for additional upstream visibility and control in some industries, including medical, aerospace and defence and high-tech.

Companies that seek Tier2/Tier3 data do so to get “early warnings” on upstream engineering and quality issues before they impact Tier 1 and brand owner manufacturing processes. Approximately 70% of the researched companies by Gartner are getting Tier 1 visibility with shipment and order status. Of these companies only 30% have the same kind of visibility on Tier2/Tier3 level.

The main question to me remains how companies (re)act to critical information upstream. In nature animals behave differently in the matter of awareness of danger en responsiveness to it. An ostrich and an elephant are highly aware of risk, but behave differently. An elephant charges in times of eminent danger, just like most chemical companies when safety is at risk. Most banks know all kind of risk calculations for their products, but are like ostriches not responsive enough to change the business behaviour structurally despite the growing company risks in the last few years. A lot of transport companies are caught like a rabbit in the headlights because of increasing fuel prices and haven’t taken enough precautions for this.

What kind of animal is your company in the matter of risk behaviour?

Martijn Lofvers, Publishing Director & Editor-in-Chief
Supply Chain Movement
martijn.lofvers@supplychainmedia.nl