In the dynamic realm of the automotive industry, the importance of risk management has reached new heights, compelling us to revisit and enhance our insights. Our recently updated white paper, titled Leveraging Risk Management Throughout the Automotive Supply Chain, represents an evolution of our work from six years ago when we first delved into risk-based thinking within the automotive sector.
The Evolution of Risk Management
The recent global challenges, including the profound impact of the COVID-19 pandemic and semiconductor crises, have underscored the critical nature of risk management. Businesses today face a complex web of challenges, from material shortages to supply chain disruptions and cyber attacks. Tier 1 suppliers, in particular, navigate heightened risks due to a lack of transparency and control over lower tier suppliers.
The Call for Proactive Risk Management
In response to these challenges, our white paper emphasizes the need for proactive risk management as a cornerstone for intelligent planning. The interconnected nature of risks demands a shift away from siloed approaches to identifying and mitigating risks. Instead, we advocate for a cross-functional approach involving voices from supply chain, purchasing, manufacturing, customer service, business strategy and other relevant internal and external functions to the organization.
Silos can lead to overlooking crucial interrelationships and interfaces, leaving organizations vulnerable to unforeseen challenges. While quality managers often initiate risk assessments, the ultimate responsibility rests with the CEO. Contingency planning should not be delegated to isolated departments; instead, it requires the involvement and oversight of top leadership.
Breaking Down Silos and Embracing Cross-Functional Collaboration
Waiting for a crisis to strike is not an option in the fast-paced automotive industry. Cross-functional teams need regular risk reviews; we recommend quarterly assessments as a best practice to adapt to the industry’s rapidly changing landscape. Our e-books about Delivering on the Promise of Delivery provide guidance on how to help your organization to accomplish this and by using our 24 Essential Supply Chain processes.
Why Read Our Risk Management White Paper?
Our white paper offers a comprehensive guide to risk management requirements, contingency planning, risk appetite considerations and solutions for automation. Aligned with industry standards IATF 16949 and MMOG/LE risk requirements, the document provides practical insights and steps for organizations aiming to enhance their risk management strategies and contingency planning.
The white paper caters not only to seasoned managers in quality and supply chain but also to employees who may be new to managing risk. The tangible value of proactive risk management and contingency planning was also discussed in a recent episode on our Auto Supply Chain Prophets podcast.
Avoiding the “It Will Never Happen to Me” Mindset
One such example highlighted on the podcast demonstrates the tangible value of being prepared for unforeseen events. By completing their MMOG/LE assessment, a supplier uncovered their vulnerability to power outages and put a contingency plan in place. Two weeks after being awarded Q1 by Ford, they faced a power outage but were ready with backup generation, avoiding customer shutdown and associated penalties.
Embracing Risk for Innovation
Embracing risk management empowers organizations to effectively plan and take action with a clear understanding of potential impacts. As the industry continues to evolve, adopting a proactive approach to risk management is key to ensuring resilience and sustained success.
Don’t forget to download our updated whitepaper and listen to our podcast episode about managing risk in the automotive supply chain. We also encourage you to watch our Auto Supply Chain Prophets with bi-monthly podcasts with insightful guests that help you navigate through tomorrow’s murky waters.
This article was co-written by Cathy Fisher, founder and president of Quistem, LLC.
