Sid Snitkin, one of my ARC Advisory Group colleagues, wrote a strategic report entitled “Technology Enables Better Risk Management” (available to ARC clients only). ARC is also having a track on risk management at our annual forum in Orlando coming up next month (February 11-14).
In the report, Sid mentions various standards and guidelines for risk management, including ISO 31000 that provides an interesting approach to conceptualizing risk. ISO’s definition of risk is not the “probability of loss,” which is the standard approach, but rather, “the effect of uncertainty on objectives.” In short, this definition implies that supply chain risk management would include the identification and management of supply chain opportunities.
Risk management process steps, including processes for managing supply chain opportunities, include the following:
- Identify new threats and opportunities.
- Assess the likelihood and impact of each threat or opportunity.
- Manage the threat/opportunity by determining the appropriate action for each based upon its assessed likelihood and potential impact.
- Manage & Control risks and opportunities by specifying triggers, and by having a schedule for periodically reviewing the status of risks/opportunities and identifying new potential opportunities.
- Document the Lessons Learned in identifying and controlling risks and opportunities.
So in terms of supply chain management, one could ask, what are the opportunities that if identified and acted upon could lead to a 5 percent reduction in supply chain costs or a 5 percent increase in service within a year? Defined this way, it’s clear that a core part of my job as a supply chain industry analyst is helping my clients with supply chain opportunity management.
In particular, industry analysts monitor technological opportunities. We seek to categorize where technologies are on the maturity spectrum, what sort of benefits come from implementing a particular technology, and what sort of ROI a company can expect from an implementation.
Technology is never the complete answer. So analysts also need to look at the interaction between technology, people, and processes.
Some of our clients use us more intelligently than others. One of ARC’s clients selects about a dozen managers and executives from various functions and sends them out to visit us on an annual basis. Core analysts from across ARC prepare presentations tailored to meet the information needs of the client. Over the course of two days, we present our research and perspectives to the client’s team and entertain their questions. Lunches and dinners are set aside for ARC folks and the executives from the client company to talk and get to know each other in an informal setting.
Following this mini-conference, the managers that attended have a good understanding of which analysts are following particular technologies. We hope that they feel comfortable enough to pick up the phone and talk to a particular analyst whenever subsequent questions about that technology come up. I can’t help but believe that clients that use us in this manner do a better job of identifying and monitoring the technological opportunities in their external environment.
So what did I tell this company that came in for the mini-conference? I told them that I believe the big supply chain opportunities that they need to monitor include robotics, better use of downstream data, and ad hoc forms of analytics (analytics outside of standard supply chain applications).