Single Point of Failure: The Ten Essential Laws of Supply Chain Risk Management
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More About This Title Single Point of Failure: The Ten Essential Laws of Supply Chain Risk Management


Over the past decade organizations have faced relentless customer demand for better value at less cost, individual customization, greater choice, faster delivery, higher quality, exceptional service, and more recently – increased environmental and social consciousness. The organization’s weapon of choice to address this increasing demand has been the supply chain. However, as the supply chain footprint changed (e.g. outsourcing, off-shoring and customer/vendor empowerment) so did the organization’s exposure to uncertainty. Organizations were taken by surprise since this exposure was unanticipated, complex and beyond their ability to manage. As customers become more demanding and change occurs at an even greater pace, supply chain risk continues to propagate like a parasite. Organizations and societies are at much greater risk of systemic failure because of the massive interdependency throughout global supply chains. The priority now is two-fold; play catch-up and address these massive gaps while deploying more intelligent and integrated strategies (i.e. social aware, instinctive, dynamic and predictive) for dealing with continuous change.

Single Point of Failure: The 10 Essential Laws of Supply Chain Risk Management uses analogies and dozens of case histories to describe the risk parasite that infects all supply chains while revealing methods to neutralize that parasite. The book addresses the questions: What are the "single points of failure"? How exposed are customers, investors, other stakeholders and ultimately the organization? What is the measurable impact (i.e. brand, financial, strategic, and non-compliance)? Who establishes the "risk paradigm"? How does the organization efficiently and effectively allocate precious resources - time, people, management attention, and capital? How is success measured? This book is both technically powerful and effectively realistic, based on today's complex global economy.


GARY S. LYNCH, CISSP, is an Author, Managing Director and Global Leader of Marsh's Supply Chain Risk Management Practice. He has contributed to the World Economic Forum (WEF) Global Risks Report, been a speaker on pressing global business risk issues for organizations such as Asia Pacific Economic Cooperation (APEC/Singapore & Australia), Risk and Insurance Management Society (RIMS), the World Customs Organization (WCO/Brussels), and The Wharton School, Center for Risk Management and Decision Processes. He also leads Marsh's Global Pandemic Response Center. He works as a management consultant, specializing in helping senior executives solve complex business risk issues. He has developed critical thought leadership and solutions around emerging risk issues, including supply chain risk management and financing, information protection strategies and schemes, value chain risk strategies, cyber/IT-risk, business resiliency and continuity, and pandemic preparedness. He is internationally recognized and has held executive operational and IT risk positions at Booz Allen Hamilton, Chase, Prudential, and Ernst & Young. He is a pioneer in helping companies use his leading-edge methodology to transform their risk management programs. Gary is the author of At Your Own Risk(Wiley) and has appeared on NBC Nightly News, Bloomberg TV, ABC, and CNBC, and has been published in CEO Magazine, Shanghai Business Review, and CIO Insights.


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?


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?


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


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


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


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


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


Chapter 8 Law #7: The Logistics Risk Management Rule: Managing the Parts Does Not Equal Managing the Whole 199

What Is Logistics Risk?

Cargo and Warehouse Theft

The Piracy Risk

What’s at Risk?

Single Points of Failure and Aggregate Risk

Supply Chains Don’t Survive on Product Flows Alone; Information Flows Are Essential

In the End It’s All about the Priorities and Economics


Chapter 9 Law #8: Mitigation: If Supply Chain Risk Management Isn’t Part of the Solution, It Will Become the Problem 225

Now What Do I Do?

Enter the Risk Intelligent Supply Chain

Economic Change—A Catalyst for Redefining Resiliency Management


At Time of Disruption


What Is Risk Mitigation?


Chapter 10 Law #9: Financing: The Best Policy Is Knowing What’s in Your Policy 249

Insurance and Its Role in Supply Chain Risk Management

Background on Insurance in the Supply Chain Risk Area

Current Insurance Solutions and Their Limitations

Introducing Supply Chain Insurance: Approach and Challenges

Corporate Customer Benefits Arising from Supply Chain Insurance


What Does the Future Hold?

A View from the Insurer’s Side


Chapter 11 Law #10: Manage the Risk as You Manage Your Own: Your Supply Chains Are All Interdependent but Unique 279

Questioning Old Assumptions

Personal Laws of the Laws

Index 287