Supply Chain Risk Response

ProbabilityAndImpactMatrixLast post we discussed the supply chain risk when your carrier goes bankrupt. Risk management needs to be addressed at both organizational and logistics strategy levels. Management may put a premium on minimizing uncertainty and prefer to invest in proper risk management than expose the organization to unneeded expenses, delays, and service disruptions.

The LinkedIn article by David Houser, Weathering the Storm: How to Manage Your Supply Chain in a Volatile World suggests companies instilling a culture of risk management and improved emergency systems could be a competitive advantage.

Along with understanding what supply chain risk management is, organizations should develop fundamental risk responses based on a risk probability impact matrix.

The APICS Dictionary, 15th edition, defines risk management as:

‘…the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate event or to maximize the realization of opportunities.’

Basic response types defined in The APICS Dictionary, 15th edition are:

Risk Acceptance ‘…a decision to take no action to deal with a risk or an inability to format a plan to deal with the risk.’

Risk Avoidance ‘…changing a plan to eliminate a risk or to protect plan objectives from its impact.’

Risk Mitigation ‘…reducing the exposure to risk, either by its likelihood or its impact,’

Risk plans are good to have in general whether its working with a staffing agency to help pick orders in the warehouse when a larger than expected number of orders are received or lining up alternative transportation routes in the event a key throughput interstate bridge burns to the ground.

And risk plans may also support your C-TPAT strategy which we will cover in the next blog.

As your APICS CLTD Coach I would expect you to review and understand Risk Management (CLTD Version 1.0, 2017 Edition pg 1-113) and Risk Strategies (CLTD Version 1.0, 2017 Edition pg 7-47)