I interviewed Reginaldo Montague who discussed supply chain risk and the importance of understanding suppliers.
Dustin: Thank you, Reginaldo, for spending your time to share your views today on supply chain risk. Can you start by providing a brief background of yourself?
Reginaldo: Sure. I have approximately twenty years of experience, primarily in manufacturing for consultancies. My most recent role was as vice president of operations for a cosmetics company.
Dustin: What is supply chain risk?
Reginaldo: In terms of supply chain risk, I like to stick to the APICS definition, which defines it as decisions and activities that have outcomes that could negatively affect information or goods within a supply chain.
Dustin: Do you have any examples of supply chain risk?
Reginaldo: Yes, I do. For example, you have a disruption in a supply chain caused by a plant shutdown due to, say, a labor dispute, for example. You may have just delays because of a poor supplier, or you’re going to have a system breakdown, where your computer systems might be antiquated, they break down and cause, essentially, a shutdown of your ability to deliver the goods to your customers.
Dustin: How can supply chain risk be addressed?
Reginaldo: It can be addressed. If I take each of those examples, in the disruption example I think companies should be focused on understanding what their suppliers are doing, visiting their suppliers, doing scorecards for their suppliers, understanding what the labor situations are with their suppliers, even reading annual reports for those critical suppliers. In terms of delays, again, supplier management becomes very important, ensuring that the suppliers are of the highest quality possible and, where possible, where needed, working with suppliers. You may want to eliminate some suppliers and replace them with new ones or improve the ones that are in place by providing your own expertise. It really depends on how your supply chain is structured.
Dustin: Any other examples?
Reginaldo: Yes, one of the things you find during very extreme circumstances, you may find that, for example, governments might shut down borders or if you think about the SARS outbreak in Asia, there may be difficulties in getting key suppliers out, as I think many of your listeners and readers know that many of the computer supplies come out of Asia. Any of these activities—either man-made or natural disasters—can have a terrible impact on supply chains. If you think about manufacturing facilities that operate on a just-in-time principle, if you stop providing them with the materials and raw components needed to conduct their manufacturing, such as what happened during 9-11, those facilities come to a halt. It’s very difficult to continue production. I argue that maintaining lean inventories and reducing costs, it’s all a very good goal; however, the tradeoff is that we’ve placed many supply chains at risk, and as a result, what we need to do is, as part of the annual business and planning cycle, as part of the S&OP, we need to review those risks and understand where there might be opportunity to mitigate them.
About Reginaldo Montague
Supply Chain & Operations Executive with Global Experience