Supply Chains Must Rely on Enterprise Risk Management

The importance of supply-chain management and the risks surrounding it have been underscored of late. The recent disaster in Japan and its continued nuclear woes have forced businesses to take an “emergency-room approach” in response. In this Quality Digest report, authors Mark Fontaine-Westhart and Greg Hutchins talk about the importance of linking supply-chain management to Enterprise Risk Management (ERM).

Unfortunately, this approach is not adhered to by many companies. ERM principles and practices are crucial to business operations, specifically in determining how to identify opportunities and manage risk.

“Savvy supply-chain managers intuitively recognize how disruptive and costly risk can be in their supply chains,” Fontaine-Westhart and Hutchins wrote in the article. “Global supply chains have become increasingly complex. Risk associated with natural disasters and their impact on global markets has been examined in some detail, both in academia and within large corporations.”

According to the authors, an emerging supply chain model currently gaining momentum combines ERM principles (such as environmental evaluation, and risk identification, assessment, and response) with key supply-chain activities. Called the “smart supply-chain management,” this approach offers a common language for executives and senior supply-chain managers.

Smart supply-chain management bridges this gap by addressing the following, according to the Quality Digest article:

  • Linking enterprise-level risk concepts with operational supply-chain management activities
  • Establishing an assessment, evaluation, and response architecture integrating traditional ERM and supply-chain management processes
  • Developing risk mitigation and management strategies to address supply chain risks; then align them with ERM strategies
  • Facilitating strategic partnerships to jointly manage and share risk
  • Creating risk management networks that engage suppliers, service delivery networks, and group purchasing organizations in risk-management planning activities

For more information about smart supply chain management and the role of ERM in limiting supply chain risk, read the full article: