Don't play it safe...

'Don't play it safe when it comes to Supply Chain Risk Management' - that is the title of Accenture's new 'global operations megatrends study'. The analysist at Accenture took a look at SCRM to identify the current top risks for supply chains and also the functions or areas within a supply chain that seem to be most at risk. Accenture also aims to highlight some best-practices top companies are implementing when it comes to setting-up and effective SCRM.Thus, let's take a look at the results of the study...

The respondents that were contacted within the survey are more than 1,000 senior managers; most of them are from large global companies from all over the world.

Figure 1: Greatest sources of supply chain risk, source: Accenture: Don't play it safe when it comes to Supply Chain Risk Management, 2014, p. 5.

When focusing on the top souces for supply chains risks, the study shows that the most important risk  source is IT (see figure 1). Two contributing factors are mentioned: On one hand, companies have failed to set-up agile IT organizations that can quickly react to market demand changes. On the other hand, too much data is insufficient or even missing or not accessible - leading to a still low level of visibility within the supply chain. Disasters, however, although often leading to high negative consequences, are not ranked as a top risk - probably due to their low probability of occurrence.

Figure 2: Approaches to risk management, source: Accenture: Don't play it safe when it comes to Supply Chain Risk Management, 2014, p. 6.

More than 75 % of the companies see operational risk management as important or even very important. This importance can be seen in the different approaches to risk management (see figure 2). The most important approaches are having a risk management in place, the use of alternative partners when needed, and the use of IT and organization to reach a visibility regarding risks. It is interesting and seems contradictory that approaches to visibility are mentioned as some risk management measure, whereas there is still a high degree of intransparency in supply chains - as mentioned above in the sections on top risks.

Accenture reports about very promising quantitative results of risk management, which can be measured by the return on investment (ROI). 21 % of the companies reached an ROI of between 51 % and 100 % from their investments in SCRM. Another 7 % of the enterprises are proud to have an ROI of even more than 100 %. However, the the question remains, how an ROI from specific actions can be measured without taking into account additional influences (from outside risk management activities).

Accenture's analysts identified three key practices that support and enhance the effectiveness of SCRM:

1. Leaders (the abovementioned group of companies with an ROI of more than 100 %) take care that SCRM gets a top priority in a company. They support this approach by installing a risk management officer, by developing SCRM skills of employees, and other practices.
2. Leading companies show a higher degree of centralization when it comes to SCRM. 43 % of the leaders have a centralized risk management, whereas only 37 % of the other companies have risk management centralized.
3. Leaders are considerably investing into SCRM, especially to increase the end-to-end visibility within the supply chain. 60 % of the leaders increase their investments in this area by more than 20 %. Only 23 % of the other companies have planned such high investments.

The study shows interesting results. It can be used to promote SCRM in an enterprise. Also, some best-practice approaches are mentioned. On the other hand, since most of the respondents are managers from large companies, it is not clear if those results would hold true also for small and medium enterprises. Also, the identification of 'leaders' by the ROI on SCRM-related investments seems to be at least questionable. This also concerns some of the best-practice approaches (especially the question of centralization/decentralization of SCRM).

The full study 'Don't play it safe when it comes to Supply Chain Risk Management', published by Accenture in 2014, can be downloaded from Accenture's website: http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Global-Megatrends-Operations-Supply-Chain-Risk-Management.pdf