May 15, 2009

One company's risk is another's opportunity

By DC Velocity Staff

During his keynote address on the second day of the conference, David Abney, chief operating officer of UPS, made a powerful case for the importance of supply chain risk management. Abney told attendees that the ability to manage risk will become as important to supply chain success as identifying and exploiting growth opportunities—if not more so.

Risk management will "assume a more prominent role in customer expectations," explained Abney. In fact, he believes that logistics practitioners will actually find new pathways to growth by helping businesses plan for unforeseen events and manage them adroitly.

To demonstrate that growth opportunity, Abney cited a 2008 study by UPS and the Economist Business Intelligence Unit of 350 senior executives who oversee global supply chains. Four in 10 respondents said the complexity of their extended networks had outpaced their ability to manage the risks embedded in them. The survey also found risk management had taken a back seat to rapid growth and low-cost sourcing during the boom years; only one in six respondents said their company was now prepared to deal with serious risks to their supply chain.

Abney said the shippers and third-party logistics service providers best equipped to manage risk will have a decentralized decision-making style rather than a top-down approach to management. "The irony is that in a world in which supply chains get larger and more inter-connected, decision making gets pushed down more and more to individuals," he told the group. "In that climate, a culture of empowered people who do the right thing for the greater purpose is a must."