Managing Supply Chain Risks Successfully – Part 3: Implementation of risk management

Sep 15, 2014    Kai Busse


riskmethods welcomes a guest post from Kai Busse, expert for the procurement area and founder of Pexin Consult.

What do we do if an event that poses a threat to our organization does in fact occur? Being prepared means that half the battle is already won. If you are already using a standardized process in terms of initiatives and preventive action related to savings initiatives, supplier development or implementation of material group strategies in Procurement, everything else is easy. If not, it’s also no problem.

Not every risk necessarily requires an action plan. What is important is to filter out the really dangerous risks from the vast range of identified risk events. For this, determine thresholds for your risk figures. If a threshold is exceeded, the introduction of countermeasures must then however be immediately investigated.

If an (hopefully rare) event that requires countermeasures then does in fact occur, these measures must be initiated quickly and effectively and be impactful. Your employees who have been assigned responsibility must know precisely what to do. For this, develop a standardized procedure that deals with all relevant information and steps in support of the action plan.

The document includes the following items:

Basic information:

  • What risk event are we dealing with
  • When did the event occur
  • Allocation of the risk event to a risk class. The risk class describes the danger potential  
  • Which product groups and categories and which supply chain(s) are affected
  • Which suppliers are affected
  • Which business units are threatened as a result of the event, and have the units been informed about the serious threat
  • Who has overall responsibility for the risk action plan(s)

Action plans (in many cases several individual preventive actions):

  • Initiated individual preventive actions
  • Designation of short-term and long-term action plans
  • Expected result from individual preventive actions
  • By when must the action plan be completed
  • Severity (progress) of individual preventive actions
  • Who is responsible for the individual preventive actions (where applicable, part of RAPID® model)

Results documentation:

  • Time of completion of individual preventive actions
  • Did the result live up to expectations? If not, what was the actual result?
  • Were follow-up actions or additional action steps necessary?

Check whether you can define standard preventive actions for certain scenarios.

If your organization has complex supply chains that necessitate the inclusion of a large number of persons, you should structure the decision-making process using the RAPID® model or a similar model. Specified decision-making channels result in gaining valuable time and completion of documentation of the overall action plan.image


RAPID® is a registered trademark of Bain & Company, Inc.

If you have implemented all three steps, you are well prepared for future risks. Each process requires practice, however. So, start with the areas that already show an increased risk potential, even if no serious threats are present.  This training will be of great benefit to you at a later stage and counteract latent risks on a preventive basis.

Be a supply chain risk management champion! Your internal customers and management will thank you for it.

Read more "Managing Supply Chain Risks Successfully":
Part 1: Risk Prevention
Part 2: Establishing a Risk Monitoring

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