In my SCPM more than just metrics (Part 3: Is SCPM all about strategy, performance, what-if or analysis?) we explored that SAP BusinessObjects Supply Chain Performance Management (SCPM) is about strategy to action but what about risks? We need to make business decisions by understand our risk appetite. Strategy and execution without risks would be a disaster for our business.
Is SCPM all about strategy to action? No it is not. It is about understanding not only the performance but also the risk that we face. We can analyze these risks, mitigate them and take action.
Let us work with an example understand how we can analyze performance with a focus on risk as well.
One of the strategic objectives for the VP of Supply Chain is to ‘Improve Supplier Reliability’. The risk that he faces for this strategic objective is supplier disruptions, all suppliers located in the same geography… He logs on to his scorecard and understands that his strategic objective ‘Improve Supplier Reliability’ is not only underperforming but also facing a high risk.
He then analyzes the risks by observing the aggregated total loss, aggregated expected loss and the mitigation/response cost. He understands that the aggregated expected loss is greater than his risk appetite.
He analyzes all the risks that affect his strategic objective and decides to mitigate the risk ‘Supplier Interruptions’ by ‘Alternative Supplier Sourcing’.
Post mitigation he has successfully lowered the possibility of occurrence of risk and the aggregated expected loss is within his risk appetite.
Using risk enabled Scorecards we can not only monitor performance but also risks. We can analyze these risks on our strategic objectives and mitigate risks if necessary.
Conclusion, SCPM is about Improved Supply Chain visibility and efficiency with SCPM, SCPM is more than just metrics (Part 1: Is SCPM all about KPIs/Metrics?), SCPM more than just metrics (Part 2: Is SCPM all about analyzing the past?), SCPM more than just metrics (Part 3: Is SCPM all about strategy, performance, what-if or analysis?) and performance with a focus on risk as well.