While I don’t obsessively worry about every possible risk, I am aware of the possibilities and I take measures to lower both the odds and severity of a mishap. I keep my vehicle well maintained, I buckle up and I pay my auto insurance. Similarly, today’s supply chain professionals must be more conscientious and proactive in their efforts to mitigate the risk of a supply chain disruption and to minimize the impact when the inevitable does occur.

As much as we may feel at the mercy of disruptions from severe weather, natural disasters, economic instability or political and social unrest, members of today’s high tech supply chain have never been better equipped to minimize the risks and capitalize on the opportunities that may arise from a supply chain disturbance.

One of the most simple, but powerful, tools at our disposal is information. Twenty-four hour news stations, social media and cellular communications give us literally instant access to events occurring in the most remote reaches of the world.

More tactically, mapping the physical network of the supply base, including manufacturing facilities, warehouses and distribution hubs, is an important part of any risk management strategy. The key here is mapping the entire supply chain network, not just top-spend suppliers or first-tier contract manufacturers. Most of this information is relatively accessible through supplier audits and, with the help of Google maps, you can create a pretty comprehensive picture of your physical supply chain.

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Remember, though, supply chains are much more fluid than they have ever been. Today’s multinationals are likely to rely on three to five different contract manufacturers (CMs) and original design manufacturers (ODMs), and scores of other suppliers around the world for the tens of thousands of parts needed to build and maintain their products. With outsourced production so commonplace, production lines can be shifted between locations within a matter of weeks, so frequent monitoring and updating of supply chain shifts is critical.

IoT technology such as sensors and RFID tracking can also provide meaningful intelligence that may be used to identify and mitigate risk throughout the end-to-end supply chain process. The ability to gather and analyze these constant data inputs is a recognized challenge throughout the supply chain profession. Those who master the digital supply chain sooner, will enjoy a substantial competitive advantage.

Once these various vehicles are used to create a composite picture of the risk landscape, then risk mitigation strategies take center stage. These efforts can range from traditional techniques such as the assignment of a cache of safety stock to more intricate maneuvering of storage facilities and full network design. Deployment of these mitigation strategies requires a detailed recovery and communications plan.

In my upcoming presentation at IBF’s Supply Chain Forecasting & Planning Conference at the DoubleTree Resort by Hilton in Scottsdale, AZ, February 22-23, 2016, I will delve deeper into the growing range of potential disruptors in the high tech supply chain. I will outline the core elements of a comprehensive supply chain risk management strategy, including how to define and map the physical supply chain, the landscape around supply chain risks and their impact on financial metrics, and how to proactively assess potential risk. I hope to see you there.

A 25-year high-tech supply chain veteran, Wade McDaniel is vice president of Solutions Architecture for Avnet Velocity, Avnet, Inc.’s global supply chain solutions business unit.

Tradeoffs! When you hear this term, you typically think of giving something up; settling for less. But when we talk about tradeoffs in supply chain segmentation, what we are really talking about are priorities. For some companies, speed is paramount while others may place a higher value on service or differentiation. For others cost may be the singular target. Whatever the value characteristic may be, supply chain segmentation is about managing multiple supply chain configurations to assure each customer gets what they most value.

A basic example of segmentation would be grouping high-volume, low-mix customers in a supply chain built for efficiency, while the supply chain for low-volume, high-mix customers would focus on maximizing flexibility. OEMs that configure their supply chains based on these trade-offs can consistently satisfy customer demands without adding cost or risk to the supply chain.

One of the most common misconceptions about supply chain segmentation is that replacing a standard supply chain model with several customized models will strain an already complicated process. In reality, however, segmentation can help in that it can simplify your supply chain. Business advisor McKinsey & Co. reported that in high tech, segmentation typically improves service levels by 5 to 10 percent while reducing inventory levels by 15 to 20 percent. In my professional experience, I’ve seen results that are even more significant.  Through segmentation, companies can better align their resources so that they are not, for example, spending money delivering commodity products ahead of demand or holding up production waiting for custom parts to arrive with a consolidated shipment of standard products from overseas.

Establishing an effective segmentation strategy requires a deep understanding of how customer and product complexity drive cost and service levels. To assure that you are starting with the most accurate picture of the supply chain, it is important to include inputs from across the organization’s business disciplines, including marketing, sales, manufacturing, planning and procurement.

At Avnet, we recommend customers use the Supply Chain Council’s SCOR methodology to define their current supply chain activity. We then help them to analyze this information in conjunction with the results of a Supply Chain Maturity Monitor (SCM2) survey, a self-assessment questionnaire that helps to identify their organization’s current supply chain reliability, responsiveness and agility levels.

What’s great about segmentation is that it is a method most companies of any size can do. As customer needs continue to diversify, the ability to effectively managed segmented supply chains will become a significant differentiator. So, if you haven’t thought about segmenting your supply chain, I’d suggest you start now, before you find your company skirting along the trailing edge of the competitive landscape.

Wade McDaniel
Vice President of Solutions Architecture
Avnet Velocity

Wade McDaniel is an upcoming presenter at the 2014 Best Practices Conference at Disney’s Yacht & Beach Club Resort.  For more information please click on the link below.

Business Planning & Forecasting: Best Practices Conference w/ Leadership Forum
Disney’s Yacht & Beach Club Resort
Orlando, Florida USA
October 26-29, 2014