Monday, February 18, 2013
IT and Risk Management for Supply Chains
It is no secret that supply chain networks often involve global partnerships, resulting in complicated relationships and extensive management requirements. Disruptions due to natural disasters and other system vulnerabilities can greatly affect manufacturing and, ultimately, business performance. Information technology is a growing trend that aids businesses and their supply chain operations.
Steve Culp, Risk Management Specialist and contributor to Forbes, writes that data sharing amongst supply chains can help with response strategies and efficient information flow. Culp states that companies can ensure that their supply chains are risk-resistant and resilient by using exercises such as scenario modeling to test any assumptions of stress that may cause negative impacts. In addition, companies can use information technology via information sharing and access to real time data to establish and maintain business continuity.
The shift towards information technology primarily relies on the “dynamic operations” concept. While companies establish supply chains during stable conditions, the networks must be flexible and dynamic to withstand involuntary volatile environments. These include political instability, natural resource dependency, and cyber crime to name a few. Using information technology systems as a base for supply chain operations is expensive and time exhaustive, thus, the effects are not clearly evident. Yet, Culp notes that companies that leverage risk management systems in conjunction with technology will increase their supply chain resiliency.
I believe IT systems are vital to international supply chains by allowing partners to share information and make decentralized decisions faster and efficiently. Nevertheless, there are several systems to choose from and they require training and culturally sensitive adaptations. Steve Culp states that managers are focused on reducing costs and are not always in favor of purchasing and integrating IT systems, which would result in explicit and implicit costs. Establishing a new IT infrastructure within a supply chain could be devastating if not properly instituted. Thus, should companies that have relative efficient supply chains adopt an IT system to counter system disruptions and boost risk mitigation strategies? Or can they rely on protocols that do not use the most responsive systems?