Sunday, March 25, 2012

Risky Business

A Cyclocross race this past season gave me a great opportunity to think about risk management.  Cyclocross racing is an interesting discipline because it involves components of traditional bike racing (going fast on flat straightaways) with the technical aspects of mountain biking (running up very steep hills, hopping over logs and riding through sand pits).  One can prepare technically for each of these obstacles but race conditions and the weather (sun, rain, snow) can affect a racer's ability to tackle them to a great degree.  The picture above shows one of the risks when, during the heat of a race, you extend yourself a little too far - hopping over a log at race speed just a little bit too low can cause you to hit your back tire and topple heels over head.

Of course this is just like business - we can prepare (perhaps extensively) but business is full of risks, many of which are not foreseeable.

At the Loyola University Supply Chain Management Breakfast Panel this past week (titled "The Cooling in China"), hosted by Professor Maciek Nowak, there was much talk about globalization but the real subtext was all about Risk Management - how will the uncertainty in supply, cost, lead time, and quality impact our organizations in the coming months and year.  Several of the keynote speakers conveyed stories about late deliveries and poor quality associated with extended supply chains.  Even though they are all employed by mature organizations that have a great deal of experience with sourcing material and products in Asia they all had painful lessons from the recent past that had a negative impact on customers.

An article in today's NY times about a poor quality part made in China illustrates some of the risks of globalization if your organization doesn't effectively manage it correctly.  The crane company appears to be clearly negligent here but this points out that everything is not always what it seems and that supply chain managers that fail to carefully vet their suppliers put their organization (and themselves) at great risk.

Back to that Cyclocross race - although I appear perilously perched on my front wheel I did safely land and stayed in the race.  Some of the time a calculated risk pays off.

I'm teaching the "Globalization" section of APICS/CSCP at DePaul University in a few weeks and would love to be able to share with the class your personal experiences with extended supply chains.  If you have a story to share please post in the comments section below.

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