5 Critical Questions CEOs Should Ask for Supply Chain Risk Management

by Source Intelligence

on November 24, 2020

As CEO, you have a lot on your plate and even small decisions are sometimes hard to make. A small shift in direction can have a snowball effect across the entire organization and the future of business; a snowball that could become an avalanche.

 

In recent years, however, it has become evident that there is a need to dedicate more focus to supply chain management. Supply chain strength and resilience are key drivers of success. The more exposed your supply chain is to disruption, the weaker it gets. This leaves CEOs wondering if their processes are ironclad, if they have end-to-end visibility, and if they have the agility required to act and adjust quickly should problems arise.

 

How well do you score on supply chain risk management? Let’s find out through the lens of 5 questions directly pertaining to your supply chain and how well you navigate the challenges.

 

 

5 CEO Risk Management Questions

 

 

Q1. Do you know the cost of supply chain disruption?

 

In a report published in August 2020, McKinsey & Company reveals that losses due to supply chain disruption average 42% of one year’s earnings over a decade, before taxes, interest, depreciation and amortization. Enough to give you pause and trigger cold shivers for your CFO.

 

supply chain disruption McKinsey

 

Of course, impacts vary depending on the severity of the disruption. Most recently, natural disasters and a global pandemic have done their share to halt the supply of some goods for months; but even less globally dramatic events can have a ripple (and significant) effect.

 

Supply chain risks and P&L have a close relationship, even more so when supply sources are heavily concentrated in specific geographic areas, as would be the case with mineral mining or highly specialized manufacturing components.

 

 

 

Q2. Do you have a clear view of your supply chain dynamics?

 

 

Transparency and visibility in supply chains could be deemed buzz words, but the reality is that you can’t steer a ship without knowing the underlying conditions.

 

A clear view of your closest suppliers is not enough to fully assess risk, but it’s a start. Keep in mind that you need to understand the complex connections upstream and downstream. Vendors have their own supply chain to manage and many factors play a more or less critical role that could break the chain.

 

Political instability, trade wars, tax policies, laws, and regulations are the tip of the iceberg in terms of risk management. Other factors should still be accounted for: financial health, reliability, safety, quality, ethical and sustainable practices, and so on.

 

Your most trusted partner could be engaged with less reliable suppliers of his own, exposing you to risk. Your role as CEO is certainly not to pin dots on a map and be cognizant of all actors in your supply chain. However, taking interest in this complex network allows you to understand where risks lurk and how to proactively allocate resources to risk prevention.

 

 

Q3. Are you leading the alignment of your supply chain with your strategic goals?

 

 

In most companies, we witness the rush to source at better costs to protect or increase margins. Emerging economies enter the race with a clear motivation to win market share.

 

Does this align with your growth strategy, both on the quality and human levels? If you are leading your business toward stronger ethics and deploying ESG efforts, then your supply chain should reflect the same mission.

 

Sadly, cheaper goods often come with cheap labor costs, which oftentimes is synonymous with unfair business practices, human rights violations, or disregard for employees’ safety and other dangerous shortcuts.

 

Onboarding processes and audit procedures are necessary to ensure you don’t allow high-risk partners in your supply chain.

 

Why would this fall into risk management duties? Simply because employees aim to please. Working toward more affordable sourcing may be a good intention but is not guaranteeing better efficiency nor long-term profits. Make sure the message is heard not just within your organization but throughout your supply chain as well.

 

To learn more about how to effectively drive ESG initiatives throughout your supply chain, read our white paper by clicking the button below.

 

Read ESG White Paper

 

Q4. Have you promoted supply chain management to a core function yet?

 

According to an Egon Zehnder’s study in 2020, 53% of surveyed supply chain managers said they report directly to their CEO. The function directly contributes to financial results, investment opportunities, and customer satisfaction. As such, it only seems fit that it be considered an executive and strategic position in the organizational chart.

 

Hiring and retaining supply chain management talents constitutes a significant competitive edge. Look for people who master all the elements associated with the job, from industry best practices to compliance requirements, relationship management capabilities, and strong leadership qualities. Think of it as a mirror reflection of yourself, a person willing and able to guide, strategize, maintain course, and promptly react in times of stormy weather.

 

 

Q5. Are you ready to invest in the latest and greatest technology?

 

Traditional supply chain management software is too often a cumbersome system that originally did the job and to which patches have been added as the need arose. At its best, it has become a somewhat obsolete system with little room for customization and progress. At its worst, it is an inadequate system that impedes both performance and compliance and distorts supply chain visibility. As a result, you’re missing out on crucial data, lack risk-analysis capabilities, and create unnecessary tasks.

 

Investing in new technology is not a synonym for breaking the bank. Nor is it wise to fall for expensive bells and whistles that serve no purpose and/or provide little insights.

 

You should be looking for a platform that is comprehensive, flexible, and allows collaboration internally and externally so no important data falls through the cracks.

 

Source Intelligence provides a supply chain risk management platform that leverages AI technology to gather large amounts of supplier data and documentation, ensure data accuracy, and flag where your supply chain is at high risk. It allows both employees and suppliers to collaborate, communicate, and participate in one centralized location.

 

 

Supply Chain Risk Management with Source Intelligence

 

 

You gain supply chain management maturity with formal processes and documented data that empowers you to identify, prioritize, and mitigate risks in real-time.

 

Source Intelligence has developed a SaaS solution that ticks all boxes and meets all the requirements in risk management. Some of our most notable features include:

 

  • Country-specific risk mapping factoring in economy characteristics, political environment, historical data
  • Virtual supplier audits leading to less expenses and minimizing on-site disruptions
  • Supplier assessment process to increase supply chain transparency and formalize supplier selection
  • Automated global compliance programs that collect and validate supplier data
  • Media monitoring to supplement your due diligence initiatives and protect your brand
  • Supplier risk assessment and benchmarking

 

 

By providing you with a comprehensive view of your supply chain and pinpointing the weakest links, our solution delivers insights on which you can plan your response in the shortest time.

 

 

As CEOs the world over are becoming painfully aware of the fragility of supply chains, we can provide you with a robust solution to deploy stronger processes and assist you in building resilience.

 

Request a demo today to start planning better tomorrows.

 

Request a Demo

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