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An Incident-Driven Priority
The devastating 2011 Japanese tsunami was a wake-up call for many companies. Even many of those not immediately affected have been rattled by the events. Senior executives around the world are meeting with their operational teams to ask the questions, “How are we impacted? What are you doing to ensure continuity of supply? What changes should we make to better prepare for future incidents?”
Unfortunately, we have seen over and over that for most companies, the memory of this will fade, and the executive team’s attention will be consumed by other matters that are deemed a higher priority. This is understandable, because top executives’ metrics, compensation, and the firm’s stock price are usually not impacted much (or at all) by the company’s level of supply chain resilience . . . until after a disruption occurs. Our past research has shown that executives’ tolerance for risks tends to be quite a bit higher than many of us would consider reasonable.
In late March and early April 2011, in the wake of the Japanese tsunami, we conducted a survey about supply chain risk. Our survey found that supply chain resilience tended to be reviewed and managed “down in the trenches” by the people with immediate responsibility for operational functions, as well as by the head of those functional units, such as the VP supply chain (see Figure 1, below). Review by executives in charge of the business unit or by corporate executives is considerably less common. (You can be sure that those same executives are reviewing sales numbers daily or weekly). This shows that for about 80% of companies, supply chain resilience is not yet a priority at the executive level, except for those executives directly responsible for supply chain functions.
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