How do you manage risk?

A recently released Accenture study, “Don’t Play it Safe When it Comes to Supply Chain Risk Management,” shows the wide range of approaches companies take when it comes to managing their supply chain risk.

Unfortunately, only slightly more than one quarter of the companies surveyed are taking the most important tack, developing a “playbook” or plan that various parts of the organization can implement immediately when a crisis strikes.

It’s well and good to identify alternative suppliers that can step in when needed.  And it’s critical to monitor all of your suppliers (not just Tier 1) on an ongoing basis for troubling trends and potential risks.  Building in excess capacity in the event of high volatility is important, too.

But if you don’t have that plan or playbook everyone can follow, you risk having everyone react “one off” and potentially exacerbate the crisis.

On Wednesday, July 16, ISM will host its Risk Management Summit in New York City.  It’s an opportunity to learn how to identify and oversee critical risks, and learn the key measurements you need to effectively communicate and implement a risk strategy.  For more information, visit ISM Conferences for 2014.

 

Thoughts on the Chinese economy

The Chinese version of the ISM PMI® has ticked up from negative to positive territory, according to reports such as this one on Bloomberg.com.

A preliminary June Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.8, up from 49.4 in May. An index above 50 signifies expectations of growth, and Chinese leaders are giving themselves credit for stimulating the economy without resorting to drastic measures.

A survey of analysts by Reuters came to a similar conclusion about the growth of the Chinese economy. More reporting of a stronger Chinese economy comes from the South China Morning Post.

We do a significant amount of work in China and the business environment there is unique, but it has matured since the days when U.S. automakers, for instance, were almost demanding that suppliers source from there. Large Chinese companies are not just focused on exports, but meeting growing domestic demand. They are adapting more sophisticated sourcing strategies of their own, and even investing in manufacturing plants in the United States, as described in this article in The Detroit News.

The strength of China’s economy and the rapid change in sophisticated sourcing is evident in  increasing  demand for development programs, certification programs and alignment with key universities in China.

The maturation of Chinese companies does tend to reduce their cost-competitiveness, but it also introduces elements of stability that mitigate some risks from sourcing at a great distance. Economic indicators that show slow, steady growth are also good signs of stability.

 

Move over Big Three

A seismic shift may be coming in the automotive industry.

“Not even two years after the delivery of the first Model S, Tesla Motors has transformed from fledgling start-up to arguably the most important car company in the world.  We are not joking,” said Morgan Stanley analyst Adam Jonas in a quote to the LA Times.

According to the article, suppliers who once dismissed this manufacturer are now considering building dedicated lines and facilities solely for Tesla’s business.

At least four southwestern states are vying mightily to become the home of Tesla’s $5 billion gigafactory which will employ more than 6,000 people to produce enough battery packs by 2020 to supply 500,000 vehicles.

But suppliers and states aren’t the only ones to sit up and take notice. One of the largest automakers in the world, General Motors, established an internal “Team Tesla” to analyze that company’s culture and success. Managing and collaborating with suppliers is one key to success.

Dare we say the current may be shifting toward electric cars?

Learn to keep your skills current

People, keep on learning is the crux of this research study “Keep Learning Once You Hit the C-Suite” in the Harvard Business Review blog.

While it’s aimed at those in the C-Suite or those who aspire to it, the results are valuable to everyone who cares about his or her career.  Who among us wouldn’t benefit from being more flexible, adaptable and curious?  A better team player?  Or from updating our communications skills and learning to interact through social media?  The study talks about the value of mentors, and not just those who’ve achieved long, successful careers.  How about a “reverse mentor,” someone younger who can help change old habits and outdated ways of thinking?

The study cites the importance of looking for opportunities to get out of comfort zones.  And, to ask for feedback from your team, peers and bosses on how to be better at work.  Always keep developing your skills, a self assessment like ADR’s DNA is a good start.  I have the view that learning never stops and I can always learn more.

Whether you’re headed to the top, or happy in the niche you’re in, it’s all good advice.

Reactions to new EPA regulations run the gamut

Reactions this week to the new EPA regulations to cut carbon pollution from power plants ranged from the most dire to the most delighted, depending upon one’s industry, state or inclination for all things environmental.

On one hand, the new regulations will result in lost jobs and higher electricity rates.  On the other, they will improve our climate, our health and ultimately lead to greater innovation.

The energy space is a complex one, and the effect of these regulations will not be as cut and dried as some might think.  For example, weren’t we headed in this direction already?  Industries have been shifting to natural gas because it’s cheaper, and wind and solar are bringing up the rear.  In addition, each of the states will be able to select their own method of implementation from a menu of policy options.

This is a long way out and we’re just getting started.  There’s a public comment period, and the regulations themselves could be challenged in congress as well as the courts.  States have two years to submit their plans to achieve the targets, and it’s always possible they could get extensions to their timetables.

I’d like to hear your thoughts on the regulations.  Is the sky falling as Chicken Little squawked or is this the best birthday ever?

Source Responsibly

Consumer pressure for sustainability has become so powerful that even a company that is dedicated to celebration and partying – Bacardi –  is taking a socially responsible position on sourcing. It has released a very detailed list of actions it’s taking.

These actions range from sustainable packaging to recycling waste to building a green-certified distillery in England. Bacardi even exclaims its goal to obtain 40% of the sugarcane-derived products used to make its rum from certified, sustainable sources by 2017 – and 100% by 2022.

Bacardi is using social media to promote its branded initiative, artfully called “Good Spirited.” So it obviously believes the initiative has marketing value. That tells us two things:  One. Sustainable sourcing is generally accepted as good for the company. Two. It’s still considered something that’s unique enough to set Bacardi apart.

The question is, how long until sustainable practices are so widely adopted and universally expected that touting them isn’t even worth it. What do you think?

 

Big Data Reality

We’re hearing a lot about big data. Marc Herman raises the question – can big data investment in big data will this help prevent huge distributions in supply chain like it did in 2011 in Japan during its earthquake and tsunami?

A better way of assessing the risk of earthquakes and tsunamis would be the straightforward (but tedious) task of mapping your supply chain all the way back to raw materials. That map  ensures you are aware of every step along the way which will explain your risks a lot faster as opposed to crunching huge numbers to evaluate your risks.

Having more information is useful for better calculating financial impact of those risks, however good ol’ fashion common sense and leg work will go a long way toward mitigating risk.

What do you think of big data?