Answer

Defending against a supply chain disruption

How can a company protect itself from a supply chain disruption?

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Supply chain disruption is part of supply-chain risk management, which should be part of a company's overall enterprise risk management program. Companies must consider multiple aspects of the supply chain when they analyze supply chain risk. Some aspects are internal, but most are external.

Internally, a company must make sure the applications and systems it uses to manage the supply chain are covered by its ongoing business continuity (BC) and disaster recovery planning effort.

Externally, supply-chain risk management seeks to identify dependencies and single points of failure in the supply chain, as well as conflicting service-level agreements. A company might depend on a single supplier for a product or service. It's not uncommon for a company to request that suppliers prove they have a BC plan and demonstrate their ability to maintain service levels matching the company's own. Another aspect of risk management includes monitoring the financial health of suppliers and making alternative supply arrangements to eliminate single points of failure.

Using predictive demand analysis to maintain the right level of inventory is another common method for managing risk. There are many supply chain management (SCM) software products available, including those from SAP AG, Oracle Corp. and JDA Software Group Inc. Among other things, these SCM products assist companies with predictive demand analysis, which enables them to calculate the appropriate levels of inventory based on demand without overstocking, while protecting them from supply chain interruptions. These sophisticated software products also help companies reduce costs by optimizing the supply chain in such areas as transport and logistics, supply planning and so forth.

Other available SCM software products include eBRP Solutions Network Inc.'s RAPS (Risk Assessment for Products and Services), which focuses on supply chain risk analysis. Among other things, RAPS helps identify such problems as single points of failure on the supply chain and excessive dependency on a single supplier. It also integrates with eBRP's BC software and can further assist with the business impact analysis (BIA) process. These SCM software tools probably are a better fit for larger companies or those with complex supply chains.

This was first published in August 2012

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