The operational risks to retailers in a proprietary, licensed or franchised distribution environment centers around numerous contingent exposures from primary, secondary and tertiary level suppliers, as well as risks associated with store-level emergencies and disruptions.
Supply chain crises can occur for many reasons – from natural disasters like the recent tsunami, floods and volcano eruption to vendor failures, dock strikes, and border/importing issues. Incidents of supply chain tampering – diversion, transshipment, grey goods, counterfeiting, and supply chin “shrinkage” – are growing as sourcing moves into less developed countries and longstanding quota protocols have been eliminated. Crises from product failures and recall have the power to dramatically impact quarterly or annual earnings.
Distribution models that include a large number of retailer-owned stores, licensed or franchised locations bring with them risks to the core brand from the behavior, practices and procedures of store managers and franchisors during emergencies and operational disruptions. Developing tools that enable each individual facility or location to customize an emergency response plan or a business continuity plan to its unique circumstances can help retailers, restaurants and oil and gas companies to protect their brands and corporate image and reputation.
- Amplified appreciation for global supply chain interdependencies, risks, and vulnerability to increasingly unpredictable natural disasters
- Single and sole source supplier dependency
- Lack of visibility into supplier continuity limits access to contingent business interruption insurance markets
- Good practice to require business continuity “service level agreements” with key suppliers, including a “right to audit” those plans
- How to apportion responsibility for emergency preparedness and business continuity practices between the company/brand and its franchisees and licensees
- Diversion, trans-shipping, counterfeiting, “grey” goods and supply chain “shrinkage” significantly impact globally-stretched supply chains
Risk Solutions International’s consultants provide business continuity planning and emergency management services and tools for the retail and franchise industry. We conduct thorough Business Impact Analyses of operations and identify single points of failure and recovery gaps. We proposed solutions that included shifting production among internal and external facilities, production discontinuation, production outsourcing, reduced order sizes and increased inventories. We document the strategies with automated business continuity tools and models. We assess value-at-risk in the supply chain and identify strategies to reduce supply chain continuity risk. We integrate sophisticated web-hosted global supply chain visibility models for tracking the impact of world events on every location, source and distribution partner. We have developed an automated survey-based business continuity and emergency management tool that enables the manager of every store or franchise location to develop a custom plan unique to its local operating environment.
For additional information on Risk Solutions International’s capabilities within the Retail and Franchising sectors, please contact Scott Corzine at SCorzine@rsi-llc.com.