The line between disorder and order lies in logistics.
Sun Tzu said, "The line between disorder and order lies in logistics." That idea is as relevant today as it was when he wrote it twenty-five hundred years ago.
Managing that line matters. That activity – managing Sun Tzu’s line between disorder and order – is Supply Chain Risk Management (SCRM).
Twenty-five years ago SCM was innovative, vibrant, and led to fresh ideas in business integration. Today this art has become a science and universities teach SCM at the undergraduate level. So where is the nexus of artful innovation in SCM taking place today?
Innovation lives in the “R” of SCRM. In a time where margin is key - whether its financial profit margin or big data margin of error - we all must push our supply chains to be focused, efficient, and effective. We cross Sun Tzu’s “disorder” line when we fail to anticipate the negative impacts of running too lean or expediting too often or stockpiling just in case.
Supply Chain Risk Management should be a standard topic in your operations reviews.
Almost a decade ago, Wieland and Wallenburg published an original document exploring Supply Chain Risk Management. According to Weiland and Wallenburg, Supply-chain Risk Management (SCRM) is "the implementation of strategies to manage both every day and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity". Some risk is inherent in any supply chain, others emerge when we push our supply chains to go faster, leaner, cheaper, or push the envelope in some other way. Regardless of why the risks exist, they must be managed to maintain the order we all desire.
Supply Chain Risk Management is where the original thought and original research is taking place in the Supply Chain today. And today, there are many geopolitical issues that every logistics practitioner needs to be thinking about:
- How exposed to risk is the supply chain? The world seems to be a more dangerous place these days. From weather to ISIS, the landscape is changing.
- How resilient is the supply chain? Trusted partners are great, but single threads in the supply chain carry risk. That risk needs to be measured, managed, and evaluated.
- Now nimble is the supply chain? If a link shuts down – say, the Korean situation leads to sanctions on China – how quickly can you recover? Have you mapped your contingency plans?
- Is there a rational and structured approach to measuring risk? Trade policy is shifting in the United States, and where it will ultimately land, is a question mark. And have you taken action with an eye on containing or mitigating the risks?
If you live in the Supply Chain, you are nimble at planning. But often that performance – live a high performance car speeding around the track in Indianapolis - creates other risks across the network.
If you have not done it already, it’s time to take the next step, and assemble a Supply Chain Risk Management Plan that helps ensure your critical operations do not cross the line into disorder.