| dc.description.abstract | Low-cost sourcing has now become a staple of competitive strategy in many
retail and manufacturing sectors. As organizations source a greater proportion
of manufactured products from China, India, and other low-cost countries the
hidden perils of these approaches are often not considered, especially within
the context of enterprise risk management (ERM). Global sourcing affords
many benefits in the form of lower prices and expanded market access. Only
recently have senior executives begun to recognize the increased risk
attributed to the higher probability of product and service flow disruptions in
global sourcing networks. A major disruption in the offshore supply chain can
“shut down” a company, and have dire consequences on profitability. This was
felt most drastically in the last few years, when such events as 9/11, the war in
Iraq, the West Cost port workers strike, and increased regulatory and customs
delays have brought supply chain operations to a standstill. Other less serious
events that can also impact customer service include natural disasters, fire and
theft, poor communication of customer requirements, part shortages, poor and
quality problems. These disruptions can be costly and have in many cases
brought distribution and production to a screeching halt. Supply chain
disruptions have been found to negatively impact shareholder value by as
much as 8-10% and is amplified in “time-sensitive” environments where early
market introduction is critical to success.
Based on a set of interviews with key executives in multiple industries, we
discovered several key themes associated with supply chain disruptions. First,
companies should develop supply chain strategies that explicitly consider two
parameters that “amplify” the negative impact of disruptions on customer and
brand performance: 1) globalization and 2) product/process complexity.
Second, companies should craft strategies with countermeasures that mitigate
the impact of these effects, namely: 1) improved visibility to key supply chain
nodes that can quickly detect disruptions, 2) well-positioned resources that
enable quick short-term recovery plans, and 3) long-term collaborative
approaches to eliminate disruptions in the future. Our research also suggests
that there is a relationship between companies that experience amplifiers and
the strategies they use. Finally, organizations exposed to both types of risk also
invest in longer-term solutions such as training and collaborative tools to
establish resilient supply chains that are agile and able to respond to
disruptions. While no company can eliminate the probability of a major supply
chain disruption, those who take the appropriate measures ahead of time will
be better positioned to manage these potentially devastating incidents when
they occur. | en_US |
