The Extent of Supplier Risk

BMW 350i (Photo credit: Daniel Photos)

With the economic challenges many companies are now focused on concerns that key suppliers will not deliver due to financial challenges. These challenges are extremely real, and the extent of these dependencies trickles throughout the supply chain. As an example, if you're an AS/RS system integrator, but rely on one or two high volume partners, your entire business can hit the wall if the economy grinds them to a halt in production. Or, to take it a step further, what if their suppliers, or suppliers' suppliers run into issues?Well what happens when a Volcano in Iceland erupts and shuts down your supply chain? That’s exactly what happened to BMW and many other companies impacted by the recent eruption.

Sitting at an airport when this all comes crashing down really brings this moment to light when you have a first hand look at the issues they are facing. It seems lots of focus around supplier risk is mostly quantitative, around quality or financial data. This is undoubtedly key to the set of metrics around assessing your supplier risk. However how much contingency planning are you doing around these types of unforeseen disruptions?

I am sure no company could have predicted a volcanic eruption but could BMW and others have planned for a prolonged delay in air cargo deliveries? The ability to discover alternative sources of supply in an emergency situation should be a component of your supplier risk program. We can all be hopeful that the ashes coming from Iceland will eventually subside. The key is to make sure when the big one hits your supply chain will not turn to ashes.

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