Think Broadly About Supply Chain Risk

Concept of confused businessman with different direction arrows

When faced with a risk to your supply chain, you really only have four options. You can ignore it, and hope that it goes away. You can accept it, and deal with the consequences. You can transfer the risk to someone else, often by buying insurance. Or, you can choose to mitigate the risk by doing something that reduces the probability or the probable impact.

Mitigation—the “do something” choice—is a pretty big bucket that means different things in different situations. There is a growing trend in our industry to embed flexibility into supply chains as a strategy for mitigating many kinds of risk. Because when things grind to a halt and you still need to get the job done, flexibility means that you have options.

This April, a group of thought leaders from industry, government and education, met in a distribution center in the heart of California’s Inland Empire to talk about the U.S. Roadmap for Material Handling and Logistics. What started out as a conversation about the future of technology and the workforce quickly grew to include regional challenges like sustainability and infrastructure. It became clear that what we were really talking about were risks to the future of their local supply chains.

I’ve been in a lot of discussions about supply chain risk over the years, and it’s interesting to see how the conversations go depending on the people in the room. Some have concentrated on the nodes in a network: “What would happen if one of our facilities were hit by a tornado?” Others are focused on the nodes feeding into the network: “What if one of our key suppliers went bankrupt?” While others dealt with the flows in the network: “What if that shipping container got stuck in the port?” But too few of these conversations dealt with the really big risks, like disruptive technologies and our industry’s workforce crisis.

By Daniel Stanton , MHI Vice President of Education and Professional Development

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