Our Guest Post today comes from John Bowler, who is Visiting Professor at DeVry University’ s College of Business, and Chris Bowler, who is Principal, Porter Keadle Moore, where he specializes in Enterprise Risk Management.
We find it interesting that the foundation of the relatively new Supply Chain Risk Management (SCRM) ISO standard is based on theories first advanced quite some time ago – PDCA (Deming, circa 1950) and Competitive Strategy and Competitive Advantage (Porter, circa 1980 and 1985). Along the same lines, Jay and Barry’s OM text states in Chapter 2 that competitive advantage is achieved through one of these three strategies: (1) differentiation, (2) cost-leadership or (3) response. We note that the Accenture 2011 Global Risk Management Study found 47% of the companies surveyed listed “reducing costs” as their highest risk management challenge.
While many firms today are focused on “lean” cost reducing practices, some companies and many experts are finding that these lean approaches can create unanticipated events, which can quickly escalate into crisis and perhaps even system failures. Is it reasonable then to suggest that a company is better served by refocusing its SCRM efforts on its specific competitive strategy’s strengths, weaknesses, opportunities, and threats? Along those lines, ISO 28002 (2011) brings these following new insights to the table:
- SCRM is really about effectively capturing profitable business opportunities compatible with a firm’s (competitive) strategy.
- SCRM effectiveness depends on the resiliency of the firm’s processes, people and technology to both stress and breaks along the supply chain.
- When an organization incorporates and aligns its SCRM with its strategic goals, the resultant degree of resiliency ensures the firm’s long-term profitability and survivability.
This new way of thinking about SCRM as Supply CHANGE Management reflects transformational thinking not only for finance and operations but for the C-suite as well.