The phrase “opportunities and risks” is used widely in trade and mainstream media, most often associated with challenging situations such as Brexit or a proposed merger. I often feel that commentators who use this phrase think that their opportunities and risks are synonymous, and that businesses and their management teams should be equally adept at dealing with both.
Let’s unpick each of these and explore how we should consider dealing with them.
Cambridge Dictionary defines opportunity as “an occasion or situation that makes it possible to do something that you want to do or have to do, or the possibility of doing something”.
Opportunity in supply chain terms can therefore be characterised as when we can do something we want to do - such as improve a process or streamline an activity - or make a systems change. This suggests that the best way to capitalise on perceived opportunities is to assess them against “things we’d like to do which’ll make our supply chain work better”, and not just simply “having a go”.
We can define risk as “a probability or threat of damage, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through pre-emptive action” (source: Business Dictionary).
Risk in supply chain terms can be characterised as requiring us to identify and be aware of vulnerabilities, their potential negative impact on supply and service, and have appropriate mitigation in place beforehand.
So, let’s give this some thought. Casting your mind back over the risks which have interrupted supply and service in the past 12 months, how many of these did your business identify in advance and have mitigation in place for?
The common theme
The common theme between opportunities and risks is that of having a view on what we want to do – mitigation in the case of risks, implementing improvements in the case of opportunities.
Historically, supply chain has been a proven source of savings and competitive advantage. To date, though, progress has largely been about making the most of what you have and making better decisions. For companies seeking transformative change, it’s now about what you should have.
Supply chain design provides the means to determine what you should have. It’s concerned with building rapid, repeatable models and processes to configure networks and flows profitably in a changing world.
In Vulnerabilities in the global supply chain, Report 3: Setting up for disruption, my colleague Chris concludes that “investing for the future is more difficult in times of uncertainty, but sophisticated modelling of supply chain scenarios to highlight risks and opportunities can help”.
Going further, it’s likely that modelling supply chain designs for the future will enable us to be better prepared for dealing with both opportunities and risks.
What are you doing to model and consider your future supply chain capabilities?
Sustainability and Strategy Manager