A competent logistician takes a holistic, not a transactional, view of Supply Chain Risk Management (SCRM). Congress is moving the Department of Defense in that direction. And that means if you do business with the federal government, get ready to answer the mail.
Supply Chain Risk Management rides on four vectors. There are strategic risks we logisticians worry about, like foreign market fluctuations or economic dislocations. There are operational risks, like diminishing manufacturing sources and material shortages (DMSMS). There are physical risks, like the driver shortage, port closures, or weather disruptions. There are financial risks, like currency fluctuations or price volatility.
President Trump signed the annual defense budget – the “John S. McCain National Defense Authorization Act for Fiscal Year 2019” – on August 13. It is over a thousand pages long. Buried in the bill (Section 881) is a definition of Supply Chain Risk for the Department of Defense.
That section says, “The term ‘supply chain risk’ means the risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of a covered system so as to surveil, deny, disrupt, or otherwise degrade the function, use, or operation of such system.”
Congress deserves credit for recognizing supply chain risk as an issue. That said, what about supply chain risk unrelated to an adversary? Not all national security threats involve an adversary. The military definition of national security includes “defense posture capable of successfully resisting hostile or destructive action from within or without, overt or covert.” What about supply chain risk outside of Defense? There are some pretty complex supply chains run by the government unrelated to the military; just take a look at the State Department, for example.
Supply Chain Risk Management in a government context isn’t just about adversaries, and it isn’t just about war. The four vectors of risk – strategic, operational, physical, and financial - are all around us. While it’s good that Congress is taking notice of supply chain risk, it’s clear they are lawyers focused on transactions, not logisticians managing systems.
Congress deserves credit for what they have done, but they haven’t gone far enough in considering the breadth of supply chain risk. While it is important that DoD embraces SCRM, like the private sector, SCRM should be a “Whole of Government” evolution, not just DoD.
Things are moving in the right direction, but there is more work to be done.