Optimize Supply Chain Risk Management

Sept. 18, 2014
The industrial equipment manufacturers that see the best return on their investment in risk management are those that make it a priority, centralize responsibility and invest aggressively.

Industrial equipment manufacturers, like many in other industries, view supply chain risk management as a top priority. And yet many of them are not optimizing its use at a time when managing risks is most needed. Unforeseen events like natural disasters and pricing fluctuations that can disrupt operations have become pervasive, making a commitment to risk management essential in today’s highly volatile global market.

New Accenture research, the Accenture Global Operations Megatrends Study—Focus on Risk Management, suggests that industrial equipment manufacturers and other companies have an opportunity to improve their ability to safeguard against such disruptions by exploring leading risk management strategies. The study surveyed more than 1,000 senior executives from a range of global companies, including 126 industrial equipment producers.

The analysis showed that although nearly all of the participating companies, including industrial equipment manufacturers, received a positive return on their investment in risk management, the leaders in this area are producing returns exceeding 100 percent. They share three practices that distinguish them from the others:

  1. Making risk management a priority. Compared with the 37 percent of other companies, 61 percent of the leading companies make risk management a strategic imperative and recognize the importance of capabilities that help them gain greater visibility and predictability across their supply chains.
  2. Centralizing their risk management responsibility. A central risk management function led by a C-suite executive or vice president who oversees all of the company’s risk management activities is a feature of 43 percent of the leaders vs. 32 percent of the non-leading participants. This approach enables an enterprise to react to risks in a more coordinated and efficient way.
  3. Investing aggressively in risk management capabilities. Our study also shows that the leaders invest heavily in supply chain risk management capabilities with a specific focus on end-to-end supply chain visibility and analytics. Such capabilities enable them to identify developments that can impact their operations, and mobilize an appropriate response.

Although there is no “blanket” process for addressing risk, especially since industrial equipment manufacturers could have a supply chain risk profile that requires a tailored approach, our study shows that a centralized, top-down strategy tends to generate the highest ROI. But whatever the approach, focusing on risk is a must, as business disruptions can be felt across a supply chain and impact key areas like quality.

Formalize the process

Industry-specific risk profiles may drive companies to take varied approaches to risk management. But embedding it as a top priority throughout an organization is at the core of developing an effective supply chain risk management approach for virtually any company. There are several fundamental actions that equipment manufacturers should consider:

  • Formalize risk management as a specific topic for discussion in relevant management meetings.
  • Install a risk management officer as part of the senior-level organization hierarchy.
  • Establish and propagate a “culture of risk management” throughout the supply chain organization.
  • Develop and nurture supply chain risk management skills as part of employees’ standard job descriptions.
  • Build and deploy the analytical tools that will help the organization respond to risks.

Commitment is key

Risk and volatility is everywhere, and not likely to diminish. In this business environment, a strong commitment to supply chain risk management by industrial equipment manufacturers will become more and more important. Not only can it help them guard against the adverse impacts of business disruption, but gain a competitive advantage in an increasingly unpredictable global marketplace.

>> James Robbins, [email protected], is Accenture’s automotive industry and industrial equipment industry North American managing director. Mark H. Pearson, [email protected], is senior managing director of Accenture Strategy, Operations.

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