INSIGHT's Jeff Karrenbauer Discusses New Types of Supply Chain Risk -- Political Unrest, Climate Change, Sudden Demand Change & Poor Technology Investments

Supply Chain Vulnerability Modeling & Analysis Mitigates Supply Chain Risk

Marketwired

MANASSAS, VA--(Marketwire - Mar 5, 2013) - INSIGHT, Inc., a top international provider of supply chain planning solutions for the world's foremost companies, believes that other supply chain risks exist besides natural disasters and premeditated attacks by intelligent adversaries. Dr. Jeff Karrenbauer, president and co-founder of INSIGHT, has been evangelizing for years the need for supply chain vulnerability analysis to mitigate risk in supply chains. He sees supply chain disruptions coming from a variety of additional sources, such as political unrest, climate change, sudden demand changes, and misguided investments in technology.

Supply chain risk may result from political and economic tensions such as those between China and Japan, where both countries lay claim to a group of uninhabited, fishing islands located in the East China Sea. Bob Ferrari of The Ferrari Group sees this manifesting in the supply chains of Japan's automotive and consumer electronics supply chains. Many factories with Japanese brand interests were forced to close their China factories for several days this past fall as anti-Japanese protests caused a concern for production worker safety. Says Mr. Ferrari, "The reminders of external supply chain risk come in many dimensions and now there is a concrete example of political tension between countries as evidence."

Seventy percent of companies surveyed by the Carbon Disclosure Project and Accenture believe that climate change will significantly affect their company revenues because it presents a physical risk to their operations. Climate change presents risks associated with extreme weather and can have adverse effects on company operations.

Other companies have invested in technology that failed and caused supply chain disruptions, which led to lost revenues, bankruptcy, and poor customer reputation, such as:

  • Foxmeyer Drug filed bankruptcy after new order management and distribution systems didn't work and fulfillment cost targets were unattainable.
  • General Motors Corp. invested billions in robot technology that did not work.
  • Online grocer, Web Van, invested in automated warehouses that drained capital, causing the company to file bankruptcy within months.
  • Hershey Foods' order management and warehouse implementation issues caused Halloween shipments to be delayed; the company lost $150 million in revenue.
  • Cisco was caught with massive inventory as demand slowed and there was no visibility program in place, resulting in a $2.2 billion inventory write-off.
  • Aris Isotoner, a division of Sara Lee, moved production from Manila to even lower-cost countries; sales decreased 50 percent and the unit was sold to Totes.

According to a recent survey by Deloitte, "53 percent of the 600 executives that participated said that supply chain disruptions have become more costly over the last three years, and 48 percent said that such events had become more frequent during that period. 'Margin erosion' was cited by 53 percent of respondents as one of their two most costly byproducts of supply chain disruptions. That was followed by 'sudden demand change,' cited by 40 percent. The latter problem reflected supply chain challenges associated with growing customer expectations, short product cycles, and emerging competitive challenges."

INSIGHT suggests a continuous supply chain design process can help companies succeed when faced with the unexpected. Comprehensive, long range supply chain planning can minimize financial impacts, preserve customer relations, and maintain optimal supply chain operations in the face of interruptions. Every company should add to these plans a set of "what-if" contingencies that could disrupt operations and develop, in advance, strategies to mitigate both risk and consequences.

About INSIGHT, Inc.

INSIGHT, Inc. provides optimization-based supply chain analytics and consulting services to meet today's dynamic business challenges. Founded by supply chain and operations research experts in 1978 to apply world-class technology with intelligence and rigor to decision making, INSIGHT solves the complex supply chain strategic, tactical, and financial planning management issues of the world's foremost companies, including many of the Fortune 100 firms, such as ExxonMobil, Nestle, and BASF. Our software and services help firms minimize costs, maximize profits, free up capital, streamline operations, and increase customer service levels. For more information, please visit us on the Web at http://www.insightoutsmart.com.

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