Are You Ready for the New El Niño?
Meteorologists warn that a strong El Niño is on its way. By now supply-chain risk management (SCRM) practitioners should have a good sense of when and where its impact will be felt.
But will they proactively assess the risk to identify suppliers in potential flood zones or potential raw materials that could be impacted by drought conditions? Are they willing to pursue risk mitigation options like relocating inventory, updating your supplier records, and finding alternate sources?
A new white paper from Resilinc, a provider of supply chain resilience and risk management intelligence and analytics, warns that chief procurement officers who have not prioritized supply chain risk management capabilities for their organization will find that they have unnecessarily multiplied the challenges facing their organizations.
Tropical Storm Etau in Japan is the first significant manifestation of El Niño. Resilinc urges SCRM practitioners to regard that even as a dress rehearsal for what may come with El Niño.
“For those who prepare,” says the Resilic report, “global supply chain disruption events are viewed not as threats but as opportunities to gain competitive advantage.”
Resilinc provides the following outline to assess the state of organizations’ resiliency strategy leadership and SCRM culture.
Supply Chain Visibility. Map your supply chain, including critical sub-tier suppliers in the projected El Niño impact regions. Gain visibility at the site/location, part, recovery time, and revenue at-risk level. Review and/or audit key supplier business continuity and emergency response plans. Leverage a visualization tool that allows you to easily map your suppliers, contractors, distributors, logistics providers, and drill down on a circumscribed region of your choosing.
Proactive Risk Mitigation. Prioritize your most critical suppliers in the impacted region based on value at-risk (revenue or profit) and not just spend. Implement mitigation strategies for high priority tier 1 and sub-tier suppliers that provide the best mix of risk treatment options, such as second/alternate sourcing, contingent business interruption insurance, inventory management, forward buying or hedging, etc. Ensure your suppliers have comprehensive business continuity plans in place for worst-case scenarios.
Incident Detection, Response, and Recovery. Have a 24/7 event monitoring service that provides early detection of El Niño incidents and other potential impacts. Build a crises preparedness plan with defined team roles, responsibilities and governance.
Map and develop IT/application/system recovery processes. Define and test basic incident response processes including war room and incident project execution. Have suppliers test their disaster response plans. Ensure processes are in place for continuous improvement.
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