David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 00:02
The Covid-19 pandemic showed us just how vulnerable supply chains are. Today we face many threats: shipping delays; a lack of workers; failing infrastructure; transportation rates that are out of control; cybersecurity threats; and of course, a worldwide pandemic that is still very much with us. But with each of these threats come opportunities.
Welcome to this limited podcast series from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats. Today, we focus on the failure to properly assess risks. Here's your moderator for this segment, CSCMP’s Supply Chain Quarterly’s executive editor, Susan Lacefield.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 00:49
Welcome to the final episode of Supply Chain Quarterly’s inaugural podcast on the top 10 threats to supply chains. Today, we are joined by global supply chain experts Steve Geary president of Supply Chain Visions family of companies and Supply Chain Quarterly columnist. Coincidentally, Steve and I are hanging out today at the Council of Supply Chain Management Professionals' Edge conference, where Steve has been chairing a track of educational sessions on supply chain risk management. Steve, in the previous episodes, we've been highlighting some of the top risks that are facing supply chains these days, and I just was wondering if you can briefly highlight what you feel are some of the top threats today?
Steve Geary, President, Supply Chain Visions 01:32
Well, I think what's become clear during the pandemic is that there are too many accountants in the room. And for years, there has been a blurring of the lines. And that somehow, the definition of "best-value supply chain" became "low-cost supply chain"...
Susan Lacefield, Executive Editor, Supply Chain Quarterly 01:56
Yes!
Steve Geary, President, Supply Chain Visions 01:57
...and those two are not the same thing. To me, a best-value supply chain is resilient, it's diverse, and it's secure, and I guarantee you those three things, you put them together, they will not be the low-cost supply chain. So, you can't get hung up on economic best value; you've got to look at strategic best value, and there's a tug of war going on in boardrooms around the country now, because, as we suffer through the pandemic, people are realizing what relying on a supply chain that reaches across the Pacific really means in terms of resilience, because it's not.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 02:39
Great. So a lot of the threats we're seeing are from having the the global supply chain where we were, we're chasing cost instead of value.
Steve Geary, President, Supply Chain Visions 02:47
We were chasing cost, thinking that was value, and cost and value are not the same thing. It's the eternal tug of war that supply chain folks have always had with the accountants.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 02:58
Right.
Steve Geary, President, Supply Chain Visions 02:59
We speak different languages, and the challenge for us is we have to understand their language and we have to translate what we mean by "best value" into terms they would understand. It's a market basket; it's not an item.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 03:13
Ah, right. Great. So obviously, as his companies evaluate the risks that they are seeing, how do they decide which ones to focus on?
Steve Geary, President, Supply Chain Visions 03:24
You can't be myopic. What people often do, is they look to their suppliers.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 03:32
Okay.
Steve Geary, President, Supply Chain Visions 03:33
But we live in complex supply chains now.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 03:36
Right.
Steve Geary, President, Supply Chain Visions 03:37
We don't have a supplier anymore. We have a wedding cake, ...
Susan Lacefield, Executive Editor, Supply Chain Quarterly 03:41
Yes, good.
Steve Geary, President, Supply Chain Visions 03:41
... and it doesn't matter to me which teir fails. If any teir or fails, the cake falls, and the cake can fall and the teir can fall with the failure of an individual supplier. So, what you have to do is collaborate across the teirs.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 04:00
Okay.
Steve Geary, President, Supply Chain Visions 04:01
You have to work with your suppliers and partner with your suppliers ,and oftentimes, they're not going to be very excited about revealing some of the information, because it's their proprietary information. Maybe you bring in a third party. Maybe you provide them with an audit that they can, "Please do this audit, you can take the company's name off of it, and then we can discuss it." You pick the high-risk tracks and you start there. You have to—you can't do it all at once, but find your high-risk tracks, reach out to your next-tier suppliers, have them reach out to their next-tier suppliers, and it's just the wedding cake.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 04:40
Okay. So, obviously you want your suppliers at your—at the table while you decide what those top risks are. Who else should you be talking to?
Steve Geary, President, Supply Chain Visions 04:47
You should be talking to your customers as well.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 04:49
Okay.
Steve Geary, President, Supply Chain Visions 04:50
Because you have to understand, just like there's risks going down, there's risks going up. You need to, I mean, because we all line up our supply chains based on our understanding of what demand will be. Well, how brittle is that demand?
Susan Lacefield, Executive Editor, Supply Chain Quarterly 05:06
Right.
Steve Geary, President, Supply Chain Visions 05:06
Will it shatter? And that is a conversation that you need to have with your customers as well, and you may be able to help them with that. It may prove to be a market opportunity. So, you look left and you look right. It's just like when you were a little kid crossing the street. Look both ways before you cross.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 05:27
Yes, but these are very difficult conversations. Any ways on how to broach those topics in a way that's not going to put people on the defensive?
Steve Geary, President, Supply Chain Visions 05:36
Well, it's the old movie line, "Show me the money."
Susan Lacefield, Executive Editor, Supply Chain Quarterly 05:39
Okay. Okay. We're back to accountants now.
Steve Geary, President, Supply Chain Visions 05:43
We are back to accountants, but at the end of the day, the game is scored by the money.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 05:47
Okay, yes.
Steve Geary, President, Supply Chain Visions 05:49
And so, I still talk about value propositions and assessing my supply chain, which is different from the way that the accountants may talk about it, but the unit of measure is still money.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:00
Okay. Do companies need to think about risk management differently these days than they did, maybe, before the pandemic hit? Or is it the same?
Steve Geary, President, Supply Chain Visions 06:12
Well, I'm being careful in my words, because I never want to tell somebody that they're wrong...
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:18
Right.
Steve Geary, President, Supply Chain Visions 06:18
... and I never want to tell somebody that they need to think differently, because that implies that they're wrong.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:24
Good point.
Steve Geary, President, Supply Chain Visions 06:25
But I might say that they may need to think more holistically.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:28
Okay, good.
Steve Geary, President, Supply Chain Visions 06:29
Broaden the horizon, broaden your sight picture.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:33
Okay.
Steve Geary, President, Supply Chain Visions 06:34
It's bigger than you historically thought it was.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:36
All right. Any suggestions on some blind spots companies have had about not thinking holistically like areas that they haven't traditionally looked at?
Steve Geary, President, Supply Chain Visions 06:47
China.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:48
Okay. That's a big one. Yeah.
Steve Geary, President, Supply Chain Visions 06:50
That's a huge one. It's, everyone went to China.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 06:52
Yeah.
Steve Geary, President, Supply Chain Visions 06:54
It is—it's crazy how reliant we are on China now, and that's putting all of your eggs in one basket.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:03
Yes.
Steve Geary, President, Supply Chain Visions 07:04
Or the—I just—we were talking before about my recent purchase of a car...
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:09
Yes.
Steve Geary, President, Supply Chain Visions 07:10
... and the car shortage that exists because of the lack of chips, because all chips—I won't say all chips—the vast preponderance of chips going in automobiles come from Taiwan. And now suddenly, you can't—there is a restricted supply of new automobiles in this country, and depending on who you talk to, it's going to be months to a year before that is finally resolved. That's just—people weren't—they weren't doing a mixed bundle in their basket.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 07:40
Okay. So, think holistically; keep—add seats to the table [for] people to talk to, and that's, are two good first steps to take when broadening your your risk management,
Steve Geary, President, Supply Chain Visions 07:55
You have to—and you have to establish a common vocabulary with the accountants, because the ultimate score keepers in any company are the accountants, and if they don't understand what you're talking about, you will continue to talk past one another. You have to establish a common understanding of what "best value" is and how you're going to measure it, and understand that that's different from "lowest cost."
Susan Lacefield, Executive Editor, Supply Chain Quarterly 08:27
Perfect. Steve, thanks so much for taking some time to sit down with us today, and I hope we will talk to you again soon.
Steve Geary, President, Supply Chain Visions 08:34
It's always a pleasure. Thank you for the opportunity.
Susan Lacefield, Executive Editor, Supply Chain Quarterly 08:36
Thanks, Steve.
David Maloney, Editorial Director, CSCMP’s Supply Chain Quarterly 08:37
Thank you for joining us for this podcast from CSCMP’s Supply Chain Quarterly, the Top 10 Supply Chain Threats. We encourage you to subscribe wherever you get your podcasts.