Risk Analysis and Contingency Planning
If you’re focusing your supply chain risk management (SCRM) strategy solely on unplanned events such as hurricanes or fire, you’re missing the “meat” of risk management: keeping your supply chain strategy in line with continuously-changing market conditions and corporate objectives.
What constitutes risk to one business may not be for another, and what may be a significant risk for one product line may not be for another, even within the same business. The key risk for most companies is performing poorly versus their competitors. What makes this challenging is that “superior performance versus competitors” may take on different characteristics depending on market conditions, product types, geographies, or economic circumstances.
LLamasoft modeling technology enables companies to create living models of the corporate supply chain, enabling three key elements of supply chain risk mitigation:
- Visibility: What is the current structure and flow of goods through my supply chain?
- Scenario Analysis: What if we try this? How would my supply chain react to this?
- Rapid Response: How should I react to this unplanned event?
In order to effectively plan for future production, a company must be able to fully visualize and understand their current operation. Continuous redesign of the supply chain, considering alternative models for the scenarios that present the most risk to the business, is the best form of risk mitigation.