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

317 Pages·2009·3.178 MB·English

by  Gary S. Lynch

(continued from front fl ap) LYNCH $39.95 US/$47.95 CAN
Praise for

the proper philosophy, culture, and systems in place to SINGLE POINT OF FAILURE SINGLE POINT OF
S
identify, measure, mitigate, and fi nance risk. Address- SINGLE POINT
ing risk from several points of view, Single Point of Fail- I FAILURE
N
ure authoritatively guides you in how to remain agile to
“We are in a world where risk is becoming a more central issue for senior management
avoid risk, be resilient to respond, adapt and absorb risk, G
and boards of directors. A fundamental area of risk is in the supply chain of the enter-
develop methodologies that are sustainable to scale, and
maintain risk solutions. prise. Gary Lynch has brought together his years of experience to provide a compre- L It is mind-boggling to consider what it takes to pro-
hensive yet pragmatic approach to understanding and managing supply chain risk. His E FAILURE duce the products we depend on—critical drugs
OF
‘ten laws’ provide a blueprint for the effective management of this very critical source like blood thinners, plastic-based products such as
GARY S. LYNCH, CISSP, is an Au-
of strategic risk.” P syringes, isotopes for medical imaging, and milk-based
thor, Managing Director and Global
baby formula. Or maybe your livelihood depends on
Leader of Marsh’s Supply Chain —David A. Nadler, Vice Chairman, Marsh & McLennan Companies
O your ability to transport products, on your customers
Risk Management Practice. He has
having access to your online order entry system, or on
contributed to the World Economic I
“Single Point of Failure is a must-read book for all executives who are navigating today’s the timely receipt of parts from your suppliers on the
N
Forum (WEF) Global Risks Report,
risk-rich space that requires them to predict, measure, manage, and tame uncertainty other side of the world. The occurrence of a single point
been a speaker on pressing global
in real time. Lynch offers a unique blend of risk management business theory, macro- T of failure—whether a product contamination, labor
business risk issues for organizations
economics considerations, and real-life, vividly described examples, creating unique strike, trade credit crunch, an earthquake, or a health
such as Asia Pacifi c Economic Cooperation (APEC/ O
learning moments and providing thought-provoking insights that, if applied, could crisis—can interrupt the fl ow of goods and cause total
Singapore & Australia), Risk and Insurance Manage-
ment Society (RIMS), the World Customs Organiza- ultimately create the difference between planned success or inadvertent failure.” F The Ten Essential systemic failure.
tion (WCO/Brussels), and The Wharton School, Center —Francois Nader, Director, President and Chief Executive Offi cer, NPS Pharmaceuticals, Inc. Written by internationally recognized industry veteran
for Risk Management and Decision Processes. He also F Laws of Supply Chain Gary Lynch, Single Point of Failure: The Ten Essential Laws
leads Marsh’s Global Pandemic Response Center. He “With Single Point of Failure, Mr. Lynch brings supply chain risk to life and makes A of Supply Chain Risk Management reveals just that—the
wheolrpkins ga ss ena iomr aenxaegceumtiveenst scoolvnes uclotamnpt,l esxp beucisailnizeisns gr isink itth eac kceeys sbiubslein teos sa lils swuaelsk ws oitfh b au rsiicnhe sbslpeenodp olef. iInts’si gah fta asnt-dp ahcuemd obuoro!k E tshseant tcirayl srteaalldiiznegs IL Risk Management tmenit igvaittainl gl,a wans dt ofi nsuacncceinssgf urlilsyk ,i dwenitthif ygiunigd,a nmceea sfuorri negs-,
issues. He has developed critical thought leadership tablishing your organization’s supply risk management
for all levels of business managers!” U
and solutions around emerging risk issues, including program, avoiding bad decisions, and gathering better
supply chain risk management and fi nancing, infor- —James Irwin, Senior Strategic Marketing Manager, Roche R information and data to make good decisions.
mation protection strategies and schemes, value chain Here, you’ll discover:
E
risk strategies, cyber/IT-risk, business resiliency and “Lynch captures the dynamics of supply-change management in an effective and com-
■ How to establish your organization’s
continuity, and pandemic preparedness. He is interna- prehensive manner ... identifying numerous risk factors that impact on reputational
supply risk management program
tionally recognized and has held executive operational capital, and are organic and typically embedded within all organizations that face
and IT risk positions at Booz Allen Hamilton, Chase, increased globalization and its associated uncertainties ... His suggested strategies ■ Why no risk strategy is a solution for
Prudential, and Ernst & Young. He is a pioneer in help- provide invaluable guidance concerning how organizations can not only recognize lead- bad decisions
ing companies use his leading-edge methodology to ing indicators that may result in deteriorating profi les associated with quality service ■ What causes supply chain risk management
transform their risk management programs. Gary is the and overall corporate social responsibility, but also anticipate potential future mutations RLT demand to trump supply
aount NhoBrC o Nf iAght tYlyo uNre wOsw, nB lRoioskm (bWerigl eTyV) , aAnBdC h, aasn adp CpNeaBreCd, idnia tthioen e avnoldu otinogno oinf gr issuks ptarionfia lbelse absessotc piartaecdt iwceisth in t hper osaucptpivlye lcyh aadidnr, easnsdin igm apnlde mpreenvte rnetmineg- isk Maws ohe Te ■ nTohte lseosusrcing strategies that create more risk,
aBnudsi nheasss Rbeeveienw p, uanbdli sChIeOd Ininsi gChEtsO. Magazine, Shanghai against salient risk parasites.” anaf Sun Es ■ Why managing the parts does not equal man-
—Jess Boronico, PhD, Dean, School of Management, New York Institute of Technology geppse aging the whole
mln
eny Ctia ■ What the best policy is for knowing what’s in
thl your policy
a
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n
Believing that all is well is a self-deception. You need to
continually analyze and evaluate the risks to your sup-
GARY S. LYNCH ply chains and business networks, determine and learn
the root cause of problems, and decide whether you have
(continued on back fl ap)
4-COLOR GLOSSY
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Single Point
of Failure
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Single Point
of Failure
THE TEN ESSENTIAL LAWS OF SUPPLY
CHAIN RISK MANAGEMENT
Gary S. Lynch
John Wiley & Sons, Inc.
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This book is printed on acid-free paper.
Copyright © 2009 Gary S. Lynch by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical,
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used their best efforts in preparing this book, they make no representations
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Library of Congress Cataloging-in-Publication Data:
Lynch, Gary S. (Gary Scott), 1958–
Single point of failure : the ten essential laws of supply chain risk management /
Gary S. Lynch.
p. cm.
Includes index.
ISBN 978-0-470-42496-4
1. Business logistics. 2. Risk management. I. Title.
HD38.5.L963 2010
658.5'03–dc22
2009026530
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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I dedicate this book to the future generations
that now must manage the risk created by prior
generations. To my children Christopher, Robert,
Colleen, and Brian; my daughter-in-law Katie; my
nieces and nephew, Brian, Jennifer, Matt, Tracey,
and Katie; to my best friend’s children, Eden
and Erika—I wish you well, for you are the ones
who have to tame the risk parasite, a new world
of uncertainty, one that is moving faster than
anyone’s ability to understand. Finally, I dedicate
this book to all those who protect and serve our
great nation—thank you.
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Contents
About the Author xi
Preface xiii
Acknowledgments xvii
Introduction Getting to the Truth 1
Chapter 1 The Laws of the Laws 9
Laws of the Laws
Risk Management Defined
Law of the Laws #1: Everyone, without Exception, Is Part of a
Supply Chain
Law of the Laws #2: No Risk Strategy Is a Substitute for
Bad Decisions and a Lack of Risk Consciousness
Law of the Laws #3: It’s All in the Details
Law of the Laws #4: People Always Operate from
Self-Interest
Indirect and Secondary Impacts
What Can You Conclude?
Notes
Chapter 2 Law #1: If You Don’t Manage and Lead Change,
You Have to Surrender to It 31
The Risk Wake - Up Call — Planned Change, Unplanned Consequences
We Can’t Change the Past, but . . . Can We
Change the Future?
Can You See the Icebergs Ahead?
Notes
vii
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viii Contents
Chapter 3 Law #2: The Paradigm Should Destroy the Parasite:
Begin by Defining the Paradigm, Not by Fighting the
Parasite 61
The Paradigm in Action
Why Does the Organization Need to Identify a
Supply Chain Risk Paradigm?
Beware! The Paradigm Can Shift without Notice
If the Shoe Fits
Notes
Chapter 4 Law #3: Manage Your Business DNA in a Petri
Dish of Evolving Risk 87
Expanding the Risk Awareness Universe
Know Your Business—Know Your Surroundings
The Keys to Your Risk Kingdom
Your Operation’s Complete Footprint
Your Action Plan
Notes
Chapter 5 Law #4: In Supply Chain Risk Management,
Demand Trumps Supply 115
Everyone’s Customer
Building Your Demand-Based Strategy
Market and Client Factors to Consider
Notes
Chapter 6 Law #5: Never Set Up Your Suppliers for Failure 143
Supply Chain Risk Management Program
Sourcing Strategies That Create More Risk, Not Less
Trust but Verify
Notes
Chapter 7 Law #6: Managing Production Risk Is a Dirty Job:
Focus on Managing the Endless Risk of Manufactured
Weakest Links 173
Going Global with the Production of Risk
A New Collaborative Effort
Why Is Production So Critical?
Part Two of the Double Whammy: Labor
Notes
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