one company's risk is another's opportunity

The ability to manage risk will become at least as important to supply chain success as identifying and exploiting growth opportunities—if not more so, said David Abney, chief operating officer of UPS Inc. Abney highlighted the growing importance of effective risk management during his keynote address at the annual conference of the Warehousing Education and Research Council (WERC), which was held in Atlanta this past April.

Abney said that risk management will "assume a more prominent role in customer expectations." In fact, by helping businesses plan for unforeseen events and manage them adroitly, logistics practitioners actually open up new pathways to growth for their companies.

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 risk 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 a serious risk to their supply chain.

Which companies will be best equipped to manage risk? According to Abney, it will be those shippers and third-party logistics service providers that have a decentralized decisionmaking style rather than a top-down approach to management. "The irony is that in a world in which supply chains get larger and more interconnected, 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."