Supply Chain Resilience: a Risk Intelligent Approach to Managing Global Supply Chains

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Supply Chain Resilience: A Risk Intelligent approach to managing global supply chains

Contents Contents

1 3 5 6 7 9

Preface A more complete view of supply chain risk? The four pillars of a resilient supply chain Resilience in action Building a resilient supply chain Ready. Set. Go.

9 Endnotes 10 Contacts 11 Nine fundamental principles of a Risk Intelligence program

Preface

This publication is the 25th whitepaper in Deloitte’s series on Risk Intelligence. The concepts and viewpoints presented build upon those in the first whitepaper in the series, The Risk Intelligent Enterprise™: ERM Done Right, as well as subsequent titles. The series includes publications that focus on roles (The Risk Intelligent CIO, The Risk Intelligent Board, etc.); industries (The Risk Intelligent Technology Company, The Risk Intelligent Energy Company, etc.); and issues (A Risk Intelligent View of Reputation, Risk Intelligence in the Age of Global Uncertainty, etc.). You may access all the whitepapers in the series free of charge at www.deloitte. com/RiskIntelligence.

Open and candid communication is a key characteristic of the Risk Intelligent Enterprise. Therefore, we encourage you to share this whitepaper broadly with colleagues at the executive, board, and senior management levels of your company. Overall, the issues outlined herein should serve as a starting point for the crucial dialogue on raising your company’s Risk Intelligence.

As used in this document, “Deloitte” means Deloitte & Touche LLP, Deloitte Tax LLP, Deloitte Consulting LLP, and Deloitte Financial Advisory Services LLP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Supply Chain Resilience

1

Forward

Supply chain risks are on the rise, as is their potential impact on business performance and shareholder value. A recent study found that 85 percent of global supply chains had experienced at least one significant disruption over the preceding 12 months1. Another study found that firms that suffered from a publicly-announced supply chain disruption delivered shareholder returns approximately 30 percent lower than their peers2. Results like these are too important to ignore – and the risks are only increasing. A variety of internal and external forces are driving the rise in supply chain risk. Some are macro trends such as globalization and global connectivity, which are making supply chains more complex and amplifying the impact of any problems that may arise. Others stem from the never-ending push to improve efficiency and reduce operating costs. Although trends such as lean manufacturing, just-in-time inventory, reduced product lifecycles, outsourcing, and supplier consolidation have yielded compelling business benefits, they have also introduced new kinds of supply chain risk and reduced the margin for error. Events that were once considered “black swans” –, high impact, but low probability events– now seem to be an almost regular occurrence. This is not necessarily because problems are happening more often, but because in a globally interconnected business environment, problems that used to remain isolated now have far-reaching impacts.

At the same time, customer expectations and product lifecycles continue to shift. Today’s buyers expect businesses to deliver a continuous stream of products that are better, faster, and cheaper – while acting responsibly toward society and the environment. And thanks to social media and the Internet, if a company has a weak link or one of its supply chain partners stumbles there’s a good chance the public will learn about it even before the CEO does. All of these trends are challenging traditional notions of “acceptable supply chain risk.” In this increasingly complex and challenging environment, what can an organization do to manage its risk exposure and protect the value of its...
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