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Who Poked The Sleeping Bear?

By Art van Bodegraven | 05/25/2013 | 7:20 AM

The  May issue of CFO magazine revealed some signs that the generally hibernating beast may be suffering through a restless slumber.  A feature-length article was devoted to the supply chain challenges of weather disruptions, and not-so-subtly suggested that cost effectiveness notions embedded in lean and just-in-time notions and supply sole-sourcing have seen their fragilities exposed.

Later in the piece, of course, some concern was expressed about needs to balance added costs with the benefits of redundancy as a risk mitigation.  Seemingly, accountants are as attached to debits and credits as is the proverbial leopard to its spots.

But, even an emerging recognition of the risks of looking at supply chains as drivers of cost reduction is better than complete ignorance.  The cynic might posit that it was the acccountants who encouraged overlooking business interruption risks in the name of managing costs in the first place.

My concerns lie more in a reality that this article is dominated by a myopic view of where the risks really are.  It's far from simply proactively dealing with weather events; the potential catastrophes that can shut down an enterprise - sometimes permanently - are myriad. 

Political turmoil  - internal and/or external - cannot be glosssed over as an exposure.  Economic and currency fragility can bring down a host country.  Individual suppliers can go out of business, sometimes pushed to that point by over-aggressive price negotiation.  Key executives, within the company, at suppliers, and at customers, can move on, or die.

In summary, the scope of what we in the supply chain community must consider goes well beyond transient weather conditions and supply chain breakdowns.  We must be intimate with how an enterprise is planning to pro-act in a full range of business interruptions, and prepare supply chain alternatives to mitigate, survive, or overcome all of them.

As to CFO's citation of one case in which suppliers are required to have contingency plans, too, I have news.  Progressive enterprises were doing this twenty-five years ago. 

On balance, though, we should all take some encouragement from the reality that this issue is now on the table in the financial community.  This is a journey that will be best completed if we travel together.

And, to the bear, "Wake up, sleepyhead.  We have some catching up to do."

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About Art van Bodegraven

Art van Bodegraven

Art van Bodegraven (1939 - 2017) was Managing Principal of the van Bodegraven Associates consultancy and Founding Principal of Discovery Executive Services, which develops and delivers supply chain educational programs. He was formerly Chair of the Supply Chain Group AG, Partner at The Progress Group LLC, Development Executive at CSCMP, Practice Leader with S4 Consulting, and a Managing Director in Coopers & Lybrand's consulting practice. Concentrating in supply chain management and logistics for over 20 years in his 50+ year business career, he has led ground-breaking strategic, operational, and educational projects for leading US and global clients. Art was principal co-author of DC Velocity's Basic Training monthly column for a decade, and was the principal co-author, with Ken Ackerman, of Fundamentals of Supply Chain Management, the definitive primer in the field. His popular blog, The Art of Art, has been a staple of DC Velocity's web site since its inception.



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