8ook 8evlew: Supply Chaln 8lsk

8y !ohn Manners-8ell
!uly 2014
7/10/2014



Supply Chain Risk
Understanding Emerging Threats to Global Supply Chains

Supply Chain Risk, by John Manners-Bell, provides a structured look at risk by establishing a series of
intersecting dimensions. First the author outlines external risk categories: Environmental, Economic,
Societal, Security, and Technological. Each has several sub categories that provide additional detail and
clarity. Then he delves into a number of industry sectors to consider their resiliency factors and concerns:
Automotive, High tech, Consumer goods/retail, Food, Fashion, and Pharma/healthcare.

The coverage from both perspectives is equally detailed and illustrated with numerous case studies. In
their intersection, for instance where Economic risks intersect with the Automotive industry, any supply
chain professional will find the information they need to quickly come up to speed on key areas of
concern as well as strategies for assessment and mitigation.

The most interesting part of the book in my opinion is the Introduction. In three
brief but compelling pages, Manners-Bell not only makes the case for the
connection between successful management of risk and sustained corporate
competitive advantage, he explains some of the misperceptions associated
with risks seeming growth as a concern. These pages are particularly
enlightening for readers with a procurement perspective, as they focus on the
identification and reallocation of costs.

By outsourcing increasing amounts of internal production to suppliers,
companies reduce their direct costs, but at a price. Manners-Bell points out
that while companies do not necessarily create additional risk by outsourcing,
they make it harder to monitor existing risks. These risks, that they used to
have direct control over and clear insight into, become harder to monitor and anticipate. What they have
done is to transform measurable internal risks into more difficult to measure external ones (p. 1). Some
outsourcing decisions introduce risk through response delays, regions of geopolitical instability, or longer
supply chains. In many cases, however, the same risks are simply moved behind the veil of another
companys operation.

The translation of this principle into costs has to do with the mindset of the executives tasks with oversight
of the spend in question. The vulnerability of supply chains has been exacerbated over the last 30 years
by strategies aimed at keeping labour and inventory costs to a minimum (p. 1). As procurement
professionals, we are the ones who carried out this exacerbation albeit unintentionally. We did exactly
what we were supposed to do, but a longer term view on the strategy reveals valid concerns.

Many procurement organizations are already trying to bring their objectives into better alignment with the
goals of the rest of the organization. This means winning over executive teams struggling to see
procurement as effectual beyond negotiating savings and managing contracts. In many cases, the fact
that we carried out risk-related initiatives such as supply base consolidation, outsourcing, and offshoring
means that we are also the best positioned to strengthen the supply chains weak points.

Fortunately, Supply Chain Risk does not focus on the elimination of risk so much as it outlines how to
build resiliency. Building is always better received by corporate leaders than elimination, not only because
it is a more positive message, but because the corporate desire to fuel its own growth is never ending. If
we accept the premise that risk can not be avoided, but can be weighed, considered, and balanced as
part of the overall corporate strategy, it becomes an opportunity for competitive advantage and
differentiation. This book will assist procurement and supply chain professionals as they make that
argument internally and then carry out the resulting plan.
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