By: Morgan International Staff Writers
The role of any Supply Chain Manager is to ensure the supply chain is robust and resilient. They should be well versed with the common pitfalls and put strategies in place to avoid them from happening, or being able to quickly recover if they do. These are our top 3 supply chain fails with avoidance and/or recovery strategies:
- Over reliance on a supplier
When a fantastic supplier is found, it can be tempting to put all your eggs into one basket. The prudent Supply Chain Manager who inherits this situation would carry out thorough due diligence to ensure the supplier is a going concern. Thereafter they would look to try and diversify and have at least one back up supplier, because in reality even if they are financially sound there may be unforeseen circumstances that could shake the supply such as an act of God, or perhaps a takeover. Over reliance on one supplier typically puts them in a very strong bargaining position, and therefore to ensure competitive pricing a contract should clearly govern the relationship and cap any price increases. Strategic supplier relationships are hugely important, but it is purely good business to have a back-up plan.
- Illegal practices
Nike has been dogged with allegations of illegal working practices in factories in their supply chain. In 2011 Nike admitted that there had been mental and physical abuse of employees at one of their suppliers producing Converse shoes in Indonesia. In fact an internal report showed that almost two thirds of the 168 factories producing Converse products worldwide failed to meet Nike’s standards for their suppliers. This is worrying to say the least, and the result it not only bad press, but also consumers choosing to buy elsewhere. The role of the Supply Chain Manager is to ensure that strict due diligence is performed on each supplier, and that audits are carried out regularly.
- No contract
A contract should not be seen as an admin exercise. It is used to agree to the terms of the engagement, and to govern the relationship. The process of agreeing the contract is in itself incredibly important so that the supplier and client are clear on their own roles and responsibilities, and what the consequences will be if they fail to deliver on those. Without a clearly written document, it is near impossible to ensure delivery is as expected.
In any supply chain, simple or complex, there are inherent risks. The role of a Supply Chain Manager is to consider the exposures and to put in place various strategies to manage these in a suitable and practical way.