DC Velocity - IdeaBook 2014

Figure 7 for an example.)

x Identify scenario implications. The final step in scenario planning is to capture insights into how the organization would fare and what decisions it should make under each scenario. For each scenario, the potential impact of organizational and decisional behavior can be assessed by setting up simulation models or by simple brainstorming exercises.

The deployment of scenario planning by organizations and its continued use validates the method as a key aspect in strategic planning and in risk assessment. At a recent Council of Supply Chain Management Professionals (CSCMP) conference, a speaker highlighted a video that was shot in the 1960s, in which the narrator predicts how the world will look in the year 1999. It is quite remarkable how accurately future inventions were predicted and future-state scenarios painted. (By the way, this video is available on You Tube by searching for “Year 1999 A.D.”)

The benefits of implementing scenario planning are summed up by one of its pioneers, Arie de Geus: “Scenarios are stories. They are works of art, rather than scientific analyses. The reliability of (their content) is less important than the types of conversations and decisions they spark.”

ART AND SCIENCE

Accurately predicting disruptions and completely mitigating risks remains improbable, but by implementing the risk management practices described above, practitioners can be better prepared to manage risks and mitigate some of their impact. In addition, the above techniques can help practitioners: segment the supply chain based on product groups and marketing channels and identify risks specific to each segment; identify risk categories and quantify each risk item based on probability and impact; and plan strategically and develop risk mitigation strategies for different future-state scenarios.

Supply chain risk management is both an art
and a science. The art aspect comes from years of
experience and sometimes reflects “gut feelings,”
and the science aspect comes from developing and
implementing risk management capabilities in the
organization. While three risk management prac-
tices were highlighted in this article, it is also worth
exploring the newer methods
that continue to be developed
as organizations search for
improved ways of managing
supply chain risk and devel-
oping competitive advantages
in increasingly globalized and
complex supply chain net-
works. c

Notes:

1. The Chief Supply Chain Officer Report 2012, SCM World (September 2012) http://www.scmworld.com/ research/reports/the-chief- supply-chain-officer-report-2012/.

2. Kevin B. Hendricks and Vinod R. Singhal, “An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price Performance and Equity Risk of the Firm,” Production and Operations Management 14. 1 (March 2005): 35–52.