Single Point of Failure: The 10 Essential Laws of Supply Chain Risk Management

by Gary S. Lynch

Over the past decade organizations have faced relentless customer demand for better value at less cost, individual customization, greater choice, faster delivery, higher quality, exceptional service, and more recently – increased environmental and social consciousness. The organization’s weapon of choice  to address this increasing demand has been the supply chain. However, as the supply chain footprint changed (e.g. outsourcing, off-shoring and customer/vendor empowerment) so did the organization’s exposure to uncertainty. Organizations were taken by surprise since this exposure was unanticipated, complex and beyond their ability to manage. As customers become more demanding and change occurs at an even greater pace, supply chain risk continues to propagate like a parasite. Organizations and societies are at much greater risk of systemic failure because of the massive interdependency throughout global supply chains. The priority now is two-fold; play catch-up and address these massive gaps while deploying more intelligent and integrated strategies (i.e. social aware, instinctive, dynamic and predictive) for dealing with continuous change. Single Point of Failure: The 10 Essential Laws of Supply Chain Risk Management  uses analogies and dozens of case histories to describe the risk parasite  that infects all supply chains while revealing methods to neutralize that parasite. The book addresses the questions: What are the "single points of failure"? How exposed are customers, investors, other stakeholders and ultimately the organization? What is the measurable impact (i.e. brand, financial, strategic, and non-compliance)? Who establishes the "risk paradigm"? How does the organization efficiently and effectively allocate precious resources - time, people, management attention, and capital? How is success measured? This book is both technically powerful and effectively realistic, based on today's complex global economy.

Genres: Business, Nonfiction

320 pages, Hardcover

First published October 13, 2009

Reviews

[Nathan Albright · Rating 5 out of 5]

This is a book for which many readers will have complicated responses. Among the variety of responses I had to the book myself were a sense of puzzlement at how the author was going to make good his claim that everyone was a part of complicated and vulnerable supply chains as more than a consumer, which I thought could have been done in a more expansive fashion than merely looking at businesses selling products. Another sort of puzzlement came from my wonderment at why the author focused so much on pandemics as opposed to other threats to supply chains. Added to this was a sense of respect for the author's mastery of the material of logistics and supply chain management and a desire to read his other book on risk management if I can find it. And on top of all of this I also felt a great deal of frustration at the idiocy involved in the management of many companies, something which many people no doubt feel about the companies they work for and work with. This is no doubt a complicated response to a book about 300 pages in length about a subject few people are passionate about, namely the subject of logistics and managing the risks of one's business processes and supply chains, but as someone passionately interested in logistics [1], it makes sense that I would read and enjoy a book like this, even if that enjoyment in the author's skill was tempered with frustration about the application of what he was talking about.

At the heart of this roughly 300 page book are a set of proposed empirical laws related to supply chain management that are based on a set of working assumptions that undergird all of the laws. The author is clearly a realist when it comes to his view of how people operate, as his list of fundamental assumptions would indicate: Everyone, without exception, is part of a supply chain; no risk strategy is a substitute for bad decisions and a lack of risk consciousness; it's all in the details; people always operate from self-interest. To be sure, these statements come with qualifications, as the author tries to encourage readers to operate from enlightened self-interest, but it is self-interest all the same. Included in the book are ten laws that spring from these assumptions and that deal with the tricky relationship of businesses with external suppliers of outsourced goods and services as well as the internal politics that most of us in the working world are all too familiar with and unhappy practitioners of. These laws include a recognition that unless a company wishes to manage and lead change it will be forced to surrender to it, focusing on defining the paradigm (or letting one's external stakeholders define it) before minimizing and handling risk, recognizing that risk changes and that one has to manage it actively, recognizing that demand trumps supply in supply chain management, a focus on the importance of not setting one's suppliers up for failure, focusing on managing the endless risk of the weakest links of one's processes, a gestalt recognition that managing the parts does not mean one has managed the whole, the importance of mitigation, dealing with the problems of financing and insurance, and a very brief discussion of supply chains being interdependent but unique and requiring individual care and attention. The author makes a solid case that all businesses and institutions need to care deeply about their supply chain systems in the face of immense risks of diverse kinds.

In the larger scale, this book is a reminder, and ought to be a clarion call to business executives, that the pursuit of lower costs by squeezing suppliers and stretching one's supply chains to increasingly backwards countries with poor regulatory regimes and infrastructures is not the best way for companies to handle contemporary business pressures. Indeed, the author argues that the lack of supervision that many companies have over their processes leaves them incredibly vulnerable to media backlash as well as customer unhappiness over declining quality in goods and services, and urges that companies adopt a carrot-and-stick sort of solution with suppliers where increased supervision of their processes is tied to increased concern about the profitability of those suppliers in long-term and mutually beneficial relationships. The author even argues that executives should be sensitive to the self-interest of employees when it comes to designing supply chain processes and their monitoring. Few specifics concerning incentives are given, but this is clearly an author wishing to place before his readers a high ethical demand when it comes to how businesses operate. One hopes that the readers of this book pay attention to that ethical demand and do not focus merely on the short-term bottom line as has often been the case.

[1] See, for example:

https://edgeinducedcohesion.blog/2015...

https://edgeinducedcohesion.blog/2015...

https://edgeinducedcohesion.blog/2013...

https://edgeinducedcohesion.blog/2012...

https://edgeinducedcohesion.blog/2012...

https://edgeinducedcohesion.blog/2012...

https://edgeinducedcohesion.blog/2011...

https://edgeinducedcohesion.blog/2011...

https://edgeinducedcohesion.blog/2011...

https://edgeinducedcohesion.blog/2015...

https://edgeinducedcohesion.blog/2012...

https://edgeinducedcohesion.blog/2016...

[Paiman Chen · Rating 4 out of 5]

Take necessary steps to prepare. Another risk event lies just around the corner. We cannot assume that we are safe.