Risk Management: A Business Priority Begging for Cognitive Computing

One hundred percent of businesses are concerned about the possibility of a disruption in their supply chain; yet, 40% of "companies do not analyze the source of the disruption, according to the Supply Chain Resilience Report 2016 by Business Continuity Institute and Zurich Insurance Group."[1] With 70% of businesses experiencing some sort of disruption last year, the fact that 2 out of 5 businesses don't have a deeper understanding of the causes behind those disruptions is surprising. The good news is that more and more companies are making supply chain risk management a priority. Gary M. Barraco, Director of Global Product Marketing for Amber Road, underscores the importance of having a good risk management process in place. He explains, "The latest Chartered Institute of Procurement & Supply (CIPS) Risk index shows global supply chain risk increased to a level of 80.8 in the 2nd quarter of 2016 — extending a trend of rising risk that has been prevalent during the past decade. ... For most supply chain professionals, this is hardly surprising: risk and threats pervade throughout our global supply chain operations, after all."[2]

Analyzing the Source of Disruption

In the age of information, it's almost inconceivable companies wouldn't take advantage of the data they have available to them. "To improve their supply chain continuity," assert analysts at the Strategic Sourcerer, "companies can always count on data and reporting to point out key factors. For data to make the best impact, though, a business may need to be vigilant enough to examine it in the first place."[3] Why don't some companies analyze their data? Jennifer McKevitt surmises they could simply be in a business-as-usual rut. "The first step to breaking the habit," she writes, "is understanding why companies do not analyze these disruptions. Valuing probability over possibility is one reason, as the unlikelihood of disruptions can lead to a false sense of security. Often, however, companies are simply unaware of the degree of risk they face."[4] Laura Heywood (@LauraH_RW) suggests this lack of awareness results from poor visibility into the supply chain. "One key area where retailers are struggling to attain visibility and control," she writes, "is in the relationships between their primary manufacturers and component suppliers."[5] Lora Cecere (@lcecere), founder of Supply Chain Insights, agrees. She explains, “Today the supply chain is more dependent on trading partners than ever before; yet, the primary communication is email and spreadsheets. Beyond the firewall, the company is flying blind. … This is inadequate.”[6]

Even though there is more data available to businesses than any time in history, in order to get the right data, supply chain stakeholders need to collaborate and share that data. That is easier said than done. Cecere points out you don’t get visibility without collaboration. “Today manufacturers are more dependent on third parties for supply chain services,” she writes. “This includes the delivery of finished goods, the of use third-party manufacturing and the procurement of direct materials. The issue is that technology investments and architecture do not support today’s reality. Value chains are growing increasingly complex, and global trade makes these gaps even more critical.” Antonia Renner (@AntoniaRenner), a Senior Solutions Marketing Manager at Informatica, notes a lack of visibility can affect more than just supply chain risk management. She asserts, “A lack of supply chain visibility and ineffective collaboration [are] often the reason[s] for poor supply chain performance. [They] often lead to bad decision making, missed market opportunities, high costs, slow time-to-market, and increased manual workloads. But more importantly, [they] frequently result in a bad customer experience.”[7] The solution to this dilemma is two-fold. First, stakeholders must agree to collaborate; and, second, the right platform needs to be leveraged to analyze the data.

From Risk to Resiliency

The right platform, now and in the future, is a cognitive computing platform. Diego Lo Giudice (@dlogiudice), an analyst with Forrester, believes a quarter of a century from now cognitive computing will have replaced artificial intelligence as the term most used to describe smart machines.[8] Lo Giudice and his colleagues at Forrester conclude, “Cognitive systems are creeping into commercial relevance beginning with high-end customer engagement applications in financial services, healthcare, and retail and will become ubiquitous in mainstream scenarios and the Internet of Things within five years.” Cognitive computing systems offer significant capabilities when it comes to supply chain visibility. If data is made available, cognitive technologies can gather and analyze it (be it structured or unstructured data). By integrating data from both internal and external sources, cognitive computing systems help provide a single version of the truth from which all corporate divisions can draw. Renner reports, “Accenture Strategy recently published the report ‘Digital Trendsetters: Secrets of the most successful digital supply chains’ and found out that ‘creating a flexible ecosystem where everyone can have access to the right information to work together collaboratively toward a common goal is a top priority for fully two thirds of digital trendsetters.'” That is as true in the area of risk management as it is for any other area of business activity.

As I have written before, "Resiliency is a great term because it contains layers of nuanced meanings. It can refer to the power or ability of something to return to its original form or position or it can refer to a thing’s ability to recover readily (i.e., to be a survivor). Both of those definitions are based on the notion that something bad has or is going to occur that requires the 'thing' in question to bounce back."[9] Kaitlyn McAvoy points out you can’t design a supply chain risk management process if you don’t really understand (i.e., have visibility into) your supply chain. She reports a Business Continuity Institute/Zurich report concluded, "Nearly 1 in 10 (9%) of the more than 500 companies surveyed for the report do not fully know who their key suppliers are. This can no doubt make supply chain risk management even more difficult for firms that lack proper oversight on who exactly their suppliers are.”[10]

Summary

Barraco concludes, "Risk mitigation requires proactive strategies, so as you prepare for the new year and assess your budget for new technology, reflect back upon the risks and threats that impacted your supply chain in 2016. Whether disruptions were caused by transportation problems, supplier missteps, poor weather, regulatory challenges, quality issues or theft, ensure supply chain risk management is a high priority." In order to be proactive, you must have data available to be analyzed. Kasia Katrycz observes, "There is a new gold rush underway in the supply chain and procurement world and this one looks to be far bigger than 1849. The 'gold' everyone is seeking today lies in the mountains of data hidden throughout the complexity of supply chains, value chains and procurement networks: Supply Chain Risk Intelligence."[11] A cognitive computing platform can help you mine the gold and provide you with all of the value it has to offer. Risk management is not an area you want enter blindfolded.

Footnotes
[1] Jennifer McKevitt, "Report: 2 in 5 companies do not analyze the cause of supply chain disruptions," Supply Chain Dive, 8 December 2016.
[2] Gary M. Barraco, "Preparing for 2017? Don't overlook rising supply chain risk," Supply Chain Dive, 15 December 2016.
[3] Staff, "Why Don't Companies Look Closer At Disruptions?" The Strategic Sourcerer, 13 December 2016.
[4] Jennifer McKevitt, "Risk, not resilience: Why companies avoid examining disruption," Supply Chain Dive, 15 December 2016.
[5] Laura Heywood, "Latest research finds more than 60% of companies lack full supply chain visibility," RetailWeek, 7 December 2016.
[6] Lora Cecere, “Beyond the Firewall: If Only I Could See,” Forbes, 25 January 2016.
[7] Antonia Renner, “Realizing a Seamless End-to-end Information Supply Chain,” Informatica Blog, 18 August 2016.
[8] Diego Lo Giudice, “Three assumptions for why the next generation of software innovation will be cognitive,” Computerworld UK, 28 August 2014.
[9] Stephen DeAngelis, "Resiliency and Supply Chain Risk Management," Enterra Insights, 27 January 2016.
[10] Kaitlyn McAvoy, “Poor Visibility Puts a Majority of Organizations at Risk for Supply Chain Disruption,” Spend Matters, 7 December 2015.
[11] Kasia Katrycz, "Supply Chain Risk Intelligence: Gold Rush of the 21st Century," Riskmethods, 9 December 2016.

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