cially important in large organizations that have
multiple product offerings that are managed via
multiple distribution channels. While high-level
risks can be assessed at the organization level, it
is ideal to first segment the supply chain and then
develop risk assessment programs for each unique
supply chain.
One way to segment the supply chain is to use
the SCOR framework, specifically the SCOR supply
chain definition matrix. The supply chain definition matrix helps define the number of supply
chains in relation to a company’s customers and
products or services. The columns in the matrix
are focused on demand—markets, channels, and
customers, while the rows in the matrix are focused
on supply—business lines, products, locations, and
suppliers.
Consider the example shown in Figure 3. A
hypothetical company has three main product
lines: food products, technology products, and
durable products. Food products are distributed
across five channels (U.S. retail, U.S. distributor,
U.S. direct, U.S. government, and international).
Tech products are distributed across three channels
(U.S. retail, U.S. original equipment manufacturers
[OEM], and international), and durables are dis-
tributed across two channels (U.S. direct and U.S.
home). In effect, this organization has 10 unique
supply chains, each with its own inherent supply
chain risks.
It may not be practical for organizations to conduct a risk assessment on all of their supply chains,
hence it is important to identify the most important ones using a “Supply Chain Priority Matrix”
like the example shown in Figure 4. To set up this
matrix:
x List all of your company’s unique supply chains
as identified in the previous step, and then identify
key performance indicators (KPIs) that are most
important to your organization. In this example,
the organization cares most about rank in terms
of revenue, gross margin percentage, number of
stock-keeping units (SKUs), unit volume, and
strategic importance. Weights can be assigned to
each of these KPIs to reflect its importance to the
organization.
x For each KPI, assign a rank to each prod-uct-channel group based on how well (or not) that
group contributed to the KPI. The highest-rank-ing supply chain receives a high number, and the
lowest-ranking supply chain receives a “ 1.” In this
[FIGURE 2] RISKS ACROSS THE EXTENDED SUPPLY CHAIN
Oil price volatility
Disease epidemics
Political unrest
Natural disasters
Weather disruptions Labor lockouts
Your Company
Suppliers’
Supplier
Supplier Customer Customer’s
Customer
Plan
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Make
Plan
Make Deliver
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