Green. Yellow. Red. These iconic and familiar colors and their associated messages of proceed, caution, and stop are ingrained in our behaviors from a very young age. In the lean environment these signals are captured in Andon lights, those red, yellow, and green signal lights that reflect activity in a production work cell. Green lights show the work cell is humming along, yellow indicating that there may be pending material or technical issues, and red, the all stop message that quickly brings aid to the manufacturing floor.
The increasing scope of supply chain risk requires applying an Andon signaling approach to the increasing multidisciplinary range of problems and worries that put our collective supply chains at risk. When we think about supply chain risk, we often identify things like weather disruptions, port congestion, and labor unrest. Yet, like an iceberg, many of the supply chain risk issues lie unexposed (and potentially deadly) under the water.
At the tactical level, risk can be related to supplier capacity issues, material shortages, lead-time extensions, employee turnover, and even the succession plans of a critical supplier’s senior management. At the strategic level there are geo-political and macro-economic issues at play that provide considerable unease and risk to standard business relationships and processes. We recently saw how bad actors with a computer can impact global commerce with the click of a few keys when they unleashed the WannaCry virus across the world.
A risk register is a project management tool used to track risk from a 360-degree approach. The key to developing a risk register is to identify any and all opportunities for risk and classify them as red, denoting a project stop, yellow, for issues that might impact a key deliverable or milestone, and green, for a issue that deserves attention but presently has no impact on the health of the project. This tool is also an excellent one for those managing the supply chain and it can be done with a simple spreadsheet, perhaps one that is sharable for cross-functional collaboration.
There are several keys to creating and maintaining a risk register. First, identify areas of risk, those issues that will impact continuity of supply. Be comprehensive and thorough, perhaps separating tactical and strategic issues. Don’t forget to identify the internal issues that might impact supplier performance as well. Note that this list could be quite long, and tend to grow as your team focus in on the risk issues of an end-to-end supply chain. Next, quantify that risk with the familiar colors of red, yellow, and green. The risk register is a living document that needs to be maintained. Many tactical items will move on and off the list, while the strategic issues will typically remain. Colors will change as well as the risk evolves.
The most important color of the risk register is yellow. Critical items in red often get significant attention, with an ultimate resolution or work-around provided to solve the problem. Green items, while important enough to be identified, are not presently creating a problem. The yellow ones need attention to keep them from going to red and hopefully to green, or in some cases even off of the list.
Risk is everywhere and those in the supply chain need to keep a sharp eye on all of the issues that may impact their business. A risk register is a way to identify and track that risk in a way that everyone will understand.
May all of your lights be green.