Risk Management is a hot topic for supple chain leaders. No one can afford disruptions! Risk comes in many forms and its source may be different depending on the industry, company, and audience. It can come from the demand side or the supply side, be product driven, or triggered by political or other known influencers. Underlying all of these causes is the financial impact. Risk management is always discussed within companies, but it is formally addressed? And how does risk management get operationalized and built into the daily fabric of the business? As demonstrated by the many initiatives already successfully managed under its umbrella, the sales and operations planning and integrating business planning process (S&OP/IBP) is a great place to start.
From a supply chain perspective, risk is associated with managing all the variables to stay on track, with backup and contingency plans to deal with any eventuality that might occur. Identifying the weaknesses and establishing contingencies to mitigate possible challenges is the DNA of supply chain. Institutionalizing and formalizing the approach is where the value of the S&OP/IBP process makes the critical difference. Establishing the sales and operations plan and vetting all the potential scenarios are already part of the process. Adding the risk factors to the plan with proper scenario testing is exactly what S&OP encompasses. The high-level, hands-on management that occurs as part of the S&OP process that turns the plans into actions that are tracked and monitored along with other scenarios during testing. In this report, we examine risk management from the demand side, the supply side, and the known areas of expected change resulting from the impact of Brexit and U.S. tax and trade policies. We will identify how the S&OP process can address issues within the existing process framework and how it can be leverages to determine the financial impact of the potential risk scenarios.
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