Deloitte framework for managing supply chain risk

02 April 2013 Authored

As supply chains have become more interconnected and global, they have also become more vulnerable. As a result, supply chain risk exposure is increasing. In most cases companies can mitigate risks through internal measures yet in some cases the risk is based on external factors which lie beyond a firms' control span. A good example is the affair surrounding horse meat, likewise caused by the complex supply chains. Retailers had no idea that their lasagna and Swedish meatballs were contaminated with horse meat.

Deloitte - Supply Chain Risks

To counter the increasing negative effects of supply chain risk, Deloitte advises companies to map such risks in the logistic supply chain carefully. The advisory firm came up with a framework at countering these situations.  The Big4 office has identified more than 200 significant sources of supply chain risk, which fall into the following four categories:

Deloitte - Supply Chain Risks

Macro-environment risks, which can have an impact on any portion of the supply chain, or across the entire supply chain. These include events such as downturns in the global economy, shortages of critical raw materials/resources, political instability, new regulatory requirements, and natural disasters such as hurricanes and tsunamis.

Extended value chain risks, stemming from problems with upstream or downstream supply chain partners, ranging from Tier One and secondary suppliers to outsourcers and even end customers.

Internal operational risks, which can occur anywhere along the chain from product development and manufacturing to distribution; increased efficiency has removed much of the "cushion" that traditionally helped companies absorb disruptions in these areas.

Functional support risks, in areas such as legal, finance, human resources and, especially, IT. Shortcomings in these functions can lead to anything from a lack of needed talent to regulatory compliance problems and interruptions to the vital flow of operational data.