Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Global Shades of Risk

Managing supply chain risk

In these uncertain times how to avoid and/or mitigate risk is attracting a lot of attention. But an aspect that up until now has not been studied in much detail is how managers in different countries perceive and prioritize supply chain risk.

For example in South America political risk is high on corporate agendas. Some countries in the region – Venezuela is a notorious case in point – have a habit of changing the rules of trade unilaterally and without notice. All of a sudden a punishing tariff has been slapped on that raw material you rely on, or the quota system you’ve been using is no longer valid. These unexpected changes can cause supply chain havoc.

A multi-national food company in the region has set up a department just to deal with these issues. Trade specialists keep a watching eye on regulatory changes and feed information to supply chain managers. The intelligence is channeled into the company’s sales & operations planning systems. But even these monitoring procedures are not enough, and the company makes a point of using intermediaries such as customs brokers that have a finger on the regulatory pulse. 

Politics can also disrupt supply chains in India – for instance Tata Motors was forced to shutter a brand new manufacturing plant because of local opposition in one region – but the vagaries of road transportation are perhaps a higher priority for supply chain managers in that country. India’s dilapidated road system poses major risks for any supply chain network.

Western companies that have to deal with extreme market uncertainty would do well to hire operations folks with experience of doing business in South America or India; they are used to dealing with disruptions that drive their western counterparts to distraction.

At the very least it’s worth making sure that you are plugged into the risk profiles of the countries in which you do business. I remember listening to a bewildered supply chain manager from a leading company in the U.S. lament about how his shipments were stuck in Brazil. Soccer’s World Cup was underway and Brazilian customs officers were downing tools to watch the action when the national team was playing. 

In order to gain a deeper understanding of these differences, the MIT Center for Transportation & Logistics has launched a global survey of people’s experiences and attitudes toward supply chain risks and risk management. MIT CTL is collecting data in six different regions of the world. Supply chain, finance, and business professionals from many different cultures and industries are participating in the survey. Sample questions include:

  1. What supply chain disruptions have you experienced?
  2. Which risks do you consider most important and least important?
  3. Is headquarters the best place to coordinate recovery efforts?

After completing the 12-minute survey respondents can request that a summary of the study findings be e-mailed to them. Email addresses will only be used to send a summary of the findings in early 2010, or to ask respondents to further explain their responses. If you are interested in participating here is the link: http://tinyurl.com/RiskSurveySN1

The information from the survey will help supply chain managers to understand the different shades of risk they will encounter across the globe. Meantime, if you have trading partners in South Africa you might want to put June and July 2010 on your watch list of risky dates. That is when South Africa hosts the next World Cup.