Tag Archive: risks

The New NAFTA & What It Means

December 27th, 2018

 

 

 

 

 

 

Recently, the USMCA (new NAFTA) agreement was signed by the U.S., Canada and Mexico.  It still needs to be ratified by lawmakers but several immediate protections went into effect.  Since I am surrounded by manufacturing and supply chain organizations and professionals in terms of clients, colleagues, trade associations and more, I can say that there is largely positive commentary about this partnership in N.A. and the improvements to the old agreement.  Of course, there was a lot of negative commentary and debate about the particulars and the impact on trade (you’d have to live under a rock not to hear them!), but it is a noteworthy step forward from our current position!

What does this mean for your business?  Are you “ready” to leverage the opportunities and minimize any risks?

What Should We Consider and/or What Impacts Could Arise?
Although most clients and colleagues expected something to work out in terms of NAFTA, many were still in a bit of a waiting pattern.  No matter the final details, it shows that collaboration will take place. I think it is noteworthy that collaboration is an integral part of the business success equation. Many years ago, collaboration was seen as a fluffy topic but it has become key to success. Perhaps we should all think further about how well we communicate and whether we can collaborate with those who don’t see eye-to-eye with us.

From a technical point-of-view, there are bound to be many implications on our businesses,  whether we source materials or products from Mexico or Canada or not. And if you are in another country, there will be an entirely different set of impacts. Think about your extended supply chain, from your suppliers’ suppliers to your customers’ customers and everyone in-between.  Are there opportunities? Risks? Be proactive, and I bet you’ll find at least one opportunity. This is another example of the need for a resilient supply chain.

Check out our new video and article series as well as our soon-to-be offered Rapid Resilient Supply Chain Assessment service:

 



Will Your Supply Chain Risk Surprise You?

November 15th, 2016
supply chain risks

What happens when you have a break in your supply chain? Do you have contingency plans in place to mitigate business interruption?

Supply chain risks abound! Just look at the recent bankruptcy of Hanjin. It created havoc in the global supply chain. Ships were virtually stranded on the water. No one knew how they’d get paid. Yet, customers still needed the product. And so the results were scary. Have you thought about these types of risks within your supply chain?

 

At our APICS Inland Empire executive panel and networking symposium, we had a panel of experts on navigating the global supply chain. A renowned international business attorney brought up a significant topic — what if a conflict brews in the South China sea? Your supply chain could stop in its tracks. What backup plans do you have?

 

How about natural disasters? We cannot control these but they have a BIG impact on our supply chain. Think about hurricanes, earthquakes, fires, volcanoes and many others. Unfortunately, they seem to occur at an increasing rate — or at least they quickly go viral. Recently, there was a fire along the 15 freeway in Southern CA on the road towards Las Vegas and the north. It created havoc beyond trucks stranded on the freeway. Manufacturers ran short on materials. Railroads and trucks were re-routed. Customers had to air freight if speed was essential. It even impacted the ports.

 

And there are many other risks. Security is a big topic alone. The bottom line is you must prepare for these risks. What will you do to ensure business continues?

Did you like this article? Continue reading on how to be the Strongest Link in your organization: 

Why Care About Supply Chain Risk?

Is Your Supply Chain Ready for Growth?

 

 



Sarbanes Oxley

July 17th, 2015
sarbanes oxley

Meant to protect investors and increase transparency in corporate accounting, implementing the Sarbanes Oxley Act takes some organizational introspection.

The 2002 Sarbanes Oxley legislation (new, enhanced standards for all U.S. public companies) was established in response to high-profile financial scandals (Enron, etc.) in order to protect shareholders and the general public from accounting errors and fraudulent practices. However, implementing SOX in a meaningful way for an organization is far from a no-brainer. A few tips include:

1. Understand your business – what are your key business processes? Understand and document those processes, from the financial risk and control perspective. Do not worry about the rest.

2. Materiality – this is another way of saying, focus on the 80/20. Focus on those areas that have a large potential financial impact on your business.

3. Understand risks – there are endless financial risks in any business. The critical element is to understand which risks are important to your business. Key controls are required for those risks.

4. Understand controls – how does your business mitigate the key risks? What options/tradeoffs exist to mitigate the risks?

5. Think about what makes sense – it is quite possible to throw out strict, irrelevant rules and instead think about what makes sense for your business – what is logical (remember risks, controls and tradeoffs). Then, it is just a matter of putting it into an appropriate communication format for SOX.

6. Evidence – a key word for SOX. Regardless of whether you have the best processes, it might not matter – evidence is the key. In many cases, if you execute effectively in your organization, your processes will not need to be changed. However, it is likely you’ll have to add evidence so that you can prove it to your auditors.

7. Segregation of duties – although logical and part of other aspects of SOX, I’ve given this a separate bullet point because it is often one of the more challenging aspects for smaller, flexible organizations to achieve. Remember, logic works so long as it is backed by evidence!  

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

Become the Strongest Link in Your Supply Chain

The Significant Value of Processes

 



Why Looking at Return on Investment (ROI) is So Much Better than Cost

June 3rd, 2015

supply chainHow many times have you heard about managing cost (or saving money) in the past week? I bet quite a few, as almost all companies focus significant efforts on cost. In all functions, and certainly if you are in or responsible for Operations, a large portion of your responsibility is to reduce cost. Similar to real estate where it is “location, location, location”, I often hear about “cost, cost, and cost”. Certainly managing cost is vital to success; however, being solely focused on cost will drive you to failure!

Instead, I advocate thinking about return on investment. For example, if you spend $1000 instead of $100,000, yet the benefit is $1100 vs. $400,000 over the same time frame, which is better? Of course, when you spend $100,000, you quadruple your investment whereas you only gain 10% with the smaller investment. With that said, of course, it makes sense to minimize the $100,000 to $90,000 if it’s feasible so you don’t have to throw the baby out with the bathwater.

Although these numbers can be compelling, it isn’t the only reason to focus on ROI. If you are thinking only of cost, you will MISS opportunities to grow your business and innovate. Think of the “cost” in this case as an investment. Are you willing to invest in your success?

One tip to implement this week:

The great news is that no matter your position, you can start thinking about ROI. For every decision you make, consider the likely benefits and costs. Costs are not only financial; there could be hefty risks as well (with small or large investments). Most executives think this way for large capital investments; however, why don’t we think this way for the smaller decisions? We should!

It doesn’t have to be lengthy and time consuming. Just think about the benefits; ask a few questions (if you don’t know, you should find out anyway) and you’ll be much more confident that you’ll end up with a better result in the end. Those businesses that think about longer-term impacts (even if the return occurs within a quarter or year; it can seem longer-term at times) will thrive.

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”

 



Why We Shouldn’t Shy Away from Risk

February 2nd, 2015

supply chainI always look for trends as I find that the 80/20 of success comes from watching and proactively addressing trends. This week, it has been obvious that if we are NOT willing to take prudent risk, things are likely to go awry.

For example, if your sales forecast has been formulated and reviewed to the best knowledge of your organization, and it translates into x number of manufacturing employees at current efficiency levels, taking the prudent risk of hiring people even if it adds to near-term cost for a slightly longer-term return on investment is well worth it.

In another example, if you are hosting a significant event and have people flying in from around the globe (as news has spread re: the success of previous events), if you are not willing to absorb the prudent risk of hotel costs if an unexpected event occurs and rooms aren’t filled, you are likely to have chaos and unhappy participants instead of building on prior successes.

Be willing to be bold with prudent risk if you are interested in success.

One tip to implement this week:

Think about a decision you are shying away from making because you are concerned about prudent risk. There is a big difference between taking radical chances and assuming prudent risk. If the logical choice is to take a small risk for high reward, it is likely prudent risk. Think about the situation as if there was no one else involved – no manager to satisfy; no peer to appease; no politics involved. What is in the best interest of the company? What seems logical? If you need to spend $10 to make $500, what is the logical choice? If you have to take the risk of upsetting a key employee to move core objectives forward, should you? It doesn’t have to be all or nothing. Accept the challenge, take the prudent risk and minimize the downside (such as thinking about how to phrase it in the key employee’s self-interest). Success will follow. 

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”