Companies must invest in making supply chains more

reliable and responsive. Such investments are, at once,

a company’s insurance against financial loss, a shield for

corporate reputation, and a platform for future growth.

 

All these efforts won the company high praise — and boosted its reputation.

 

Wal-Mart’s preparedness for the more recent Hurricane Gustav was even more meticulous. It used a sophisticated software program to estimate how the storm could affect individual Wal-Mart facilities and used the information to prepare for emergency services and mitigate its own merchandise losses.

 

If hurricanes are a leading risk for companies on the Gulf Coast, environmental degradation is a major concern for many others. Ikea, the home furnishings retailer, sources from 1,600 suppliers in 55 countries. The company requires its furniture makers to take steps to assure that the wood they use was legally harvested and not sourced from protected forests.

 

This is just one aspect of Ikea’s broad supplier code of conduct, known as IWAY (or the Ikea Way on Purchasing Home Furnishings Products), that establishes a host of quality, safety, environmental, forestry, and social standards throughout its supply chain.

 

The company has developed an extensive auditing process, including third-party auditors, in which monitoring groups regularly visit suppliers and large sub-suppliers. In 2006, the company said, it stopped working with 27 suppliers, in part due to non-compliance with its supply chain standards.

 

Companies across all industries must identify leading risk indicators and continuously update and analyze this data for monitoring supplier performance. Those that understand risk interdependencies and consider risk mitigation throughout the

life cycle of supply chain activities will be more successful than others at assuring supply chain integrity.

 

The chart on a previous page, “A Leading Approach to Supplier Risk Management,” illustrates this comprehensive approach to supplier risk management.

 

PROBLEM PREVENTION: BEST SUPPLY CHAIN MANAGEMENT STRATEGY

Supply chains are remarkably intricate and productive webs that have been woven over a long, relatively stable period of global economic integration.

 

But now, economic and regulatory change is afoot.

 

Organizations that want to assure supply chain’s integrity can no longer afford to focus solely on cost reduction initiatives. Companies must invest in making supply chains more reliable and responsive. Such investments are, at once, a company’s insurance against financial loss, a shield for corporate reputation, and a platform for future growth.

 

Companies that view their supply chains as integral to their corporate strategy are making such investments.

 

In doing so, they are safeguarding their reputation and their brand equity, and differentiating themselves within their markets. n

 

To see the complete PricewaterhouseCoopers report, please go to: http://pwc.com/SupplyChainIntegrity