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Have you ever watched a baseball game and seen three outfielders converge on a high fly ball, only to stand idly by while the ball falls to the ground between them? Too often, the electronics supply chain’s approach to risk management mirrors this scenario. Everybody knows something needs to be done, but in the end, they assume someone else is going to make the play.
Today, however, the stakes are too high and the risks are too prevalent to leave anything to chance. To meaningfully mitigate supply chain risks, each and every player -- from raw materials supplier through end product manufacturing -- must actively manage the vulnerabilities that are inherent in their particular portion of the ecosystem. A failure to do so could turn a relatively minor disruption into a major crisis.
This is an aspect of risk management that I believe many players within the supply chain do not fully grasp. The potential damage a supply chain disruption can cause is not always repaired by simply smoothing over some customer service complaints. There can be a tangible -- and very costly -- impact on a company’s overall valuation, including lower revenue, higher costs, and shareholder value loss.
Research from the DuPree College of Management at the Georgia Institute of Technology shows that the total shareholder value loss associated with a supply chain disruption can be as high as 25 percent, regardless of who or what has caused the glitch.
Yet, according to a Supply Chain Council member survey, less than half of enterprises have established metrics and procedures for assessing and managing supply risks. Furthermore, these organizations lack sufficient market intelligence, processes, and information systems to effectively predict and mitigate these risks. Without this data, these companies are putting their supply chains at risk without even realizing it.
While there is no one-size-fits-all supply chain risk management strategy, one element that I believe every risk management plan should include is assessment. An assessment tool such as the Supply Chain Operations Reference (SCOR) model provides a comprehensive set of metrics covering all levels of the supply chain. This latest version of the original SCOR model enables users to benchmark their supply chain metrics against similar companies in their industry.
Using this information, they can determine where to focus their risk management emphasis based on their relative performance versus their peer set and whether they are managing their supply chain based on cost versus reliability, responsiveness, or agility. They can then determine whether it is more important to be superior, have an advantage, or be at parity, and then reprioritize their investments to achieve the status they desire.
Managing supply chain risk proactively is rapidly becoming a competitive differentiator in our industry. Using the SCOR model as a foundation for your risk management program will help ensure that you will be ready to catch whatever life throws at you.
I've always found the concept of risk management to be a hard one to grasp, but once you understand how to identify and quantify risk, it seems imperative to act. Ultimately, a company should rely on itself and its own data in risk-management scenarios. It's great to trust your partners, but the electronics supply chain is so complex that the missed fly ball scenario seems all too likely.
After reading this article, it still amazes me that so many companies throughout the supply chain seem to neglect risk management. What they fail to realize is that they are a vital piece of a puzzle. If they create a break in the chain they mess with the whole big picture and not just themselves. By thinking that they can have customer service straighten things out, they don't realize that they also might have messed with the companies before and after them in the supply chain. By taking a little time to strategize and think ahead, many supply chain issues could be eliminated.
Yes, I think anyone in industry has seen this happen over and over. In the workplace, we need to do the equivalent of “calling the ball” – decide who is in the best position to make the play, and clearly assign the task.
Thanks for the comments so far. If anyone is interested in getting help doing a SC risk assessment of your company we can help. At Avnet Velocity, we are thought leaders in this space and can help you raise awareness in your own companies.
I wonder how much cost has been involved to prevent this kind of theft.
That's a practical point, all right. Based on those numbers, a cost of $300,000 to prevent theft would not yield a net gain.
I feel new technology should be inherited in order to track the goods more efficiently once it has been despatched out of factory and also to add additional officers to strengthen the supply chain. all these will definitely increase the cost on consumers and companies.
Rsik management is a very complex task considering the huge number of suppliers, customers and service providers involved in delivering the product. But with a right set of people, good number of manufacturing locations and right logistics the risk can be mitigated. But all the companies should vision the future and have both short term and long terms plans to counter the risk.
Stealing a container at a port or during trucking must be a huge undertaking. Containers can be and are tracked from the point of release to the port; and then once they leave the port confines. I imagine bogus truckers just drive off with these containers? Wow.
Excellent points all! I hope the blog creates some awareness to the topic.
The ratio of cost to prevent theft vs. the cost of the items stolen has to make sense. While the value of the goods is over $500K, the cost is considerably lower. It may be easier for the companies to write off the stolen goods than invest in technology or elaborate methods to prevent the theft. I understand no one wants to see their goods stolen, however, it is still a cost issue at the end of the day.
Yes, but at the same time, if one doesn't invest in the security measures, the losses would likely be much higher.
Companies should concentrate on an effective security program, which must be well planned and combine technology with robust security procedures.Screen and train employees about security awareness and know them about the places which has more chances of theft and which product has high ratio of lost.
Using technologies like GPS on borad tracking to moniter vehicles will reduce the chances of theft.
Besides this, there are other risks such as pirate attack as well.
Electronics theft is similar to any pther product expect most of the times the product have individual serial numbers to actually include the traceability into the products. Only when the OEM's are badly hit by the product theft, they might start worrying. Othereise this looks like an every day business and to avoid this the companies may need to issue all the product in the future as a software license basis.
Does the study show if the decline has anything to do with implementation of RFID tags or other electronic security systems? For years it's been praised as a great technology that will help reduce this type of problems.
Is the complete system still too expensive? Are the individual tags too expensive?
Hi Mr. Roques,
The report didn't comment on the use of RFID tags or other security systems. Essentially, the report looked at the types of consumer goods that were stolen, where they were stolen and the cost of these goods.
As far as I'm concerned, security can always be improved at various stages along the supply chain.
Thanks for your comments.
Nicole
I was reading that Pfizer implemented RFID, specially in their Viagra product to reduce theft and counterfeiting. Don't know how recent that news is, because I don't know if RFID is still a technology to watch or if it's being replaced with something else. Any thoughts here?
I hope the chips weren't in the pills? Maybe it's an effort of Pfizer to track its pharmaceutical users.
haha! I seriously doubt that Pfizer is putting chips in the actual pills (don't think the FDA would be happy about it) but to the cases that contain several hundres, thousands of them.
I would believe that if some companies didn't do things the FDA doesn't want them to anyway… (aka get what we need now & worry about the consequences later).
I seriously doubt that Pfizer will put their revenus in jeopardy by adding a RFID tag (or something else, for that matter) that the FDA doesn't approve.