5 Steps to Manage EPC supply chain risks

As I started to write about Common Data Environment, some how my focus shifted to the Corona virus and it’s impact on projects across the globe. . When the news about the impact of Corona virus conquer the news channels, how can I drift away from it. While many still think that the project management good practices are good only for the academics, these are the moments of truth when the chasm between theory and practice evaporates. How can we manage difficult to detect procurement risks, especially for items with long lead times?. This blog post is my inquiry for an answer to this question.

Impact on project procurements

By now infamous city of Wuhan in China is known for producing metal products, mechanical equipment and solar panels as well as electrical and electronics manufacturing. There are 164 manufacturing facilities in Wuhan creating products often used by the global construction industry, including 13 plants that directly manufacture construction materials. It is not only that materials will be unavailable, it’s that materials will be unaffordable. Not only will supplies be disrupted, but stakeholders should also prepare themselves for other ramifications such as higher costs, the collapse of strategic partnerships, logistics breakdowns and possible legal squabbles as parties debate whether contracts may provide “force majeure” relief.

Top Supply chain risks identified for 2019-20

My search for global supplier chain risks revealed the following list of risks;

  1. Global trade wars and Brexit. Global trade wars between the United States and the rest of the world will continue to impact many manufacturing supply chains
  2. Raw material shortages. Political instability and plant shutdowns are likely to result in shortages of critical raw materials.
  3. Safety recalls. Quality issues
  4. Climate change risk. Over the long term, climate change will continue to bring more frequent and severe weather patterns—droughts, flooding, tropical storms, wildfires, volcano eruptions and earthquakes—with wide-ranging and devastating effects on global supply chains
  5. Tougher environmental regulations. To counter the impact of climate change, authorities around the world have started to introduce stricter environmental regulations
  6. Economic uncertainty. The global trade war, uncertainty over Brexit, and tougher environmental regulations etc leads to economical uncertainty.
  7. Cargo theft. Because goods are typically stolen while in transit, cargo theft predominantly threatens the supply of electronics and consumer goods
  8. Container ship fires. Several major container ship fires in 2018 and early 2019 highlight what continues to be a growing risk for maritime-dependent supply chains
  9. Border battles. In the United Kingdom, looming uncertainty over post-Brexit trade policies creates questions as to what new tariff and customs regimes might look like
  10. Drone risk in the aviation industry. “Airport disruptions related to air traffic safety are likely to become more frequent in 2019, and thus present a greater risk of disruption to aviation logistics operations
  11. Political and government changes
  12. Environmental risks triggering stringent controls
  13. Catastrophes – earthquakes and famine
  14. Connectivity
  15. Cyber attacks
  16. Data integrity and quality
  17. Supplier consistency

That is quite a lot, and each item in the list can impact the availability of materials and equipment for projects, especially material with long lead time for procurements. Unfortunately, even this list prepared by experts list does not list the possibility of a pandemic. Experts have again failed to identify opportunity for a pandemic even after having historical data favoring the possibilities of recurring pandemics.

Why are we missing out those supply chain risks which we could have identified?.

  • Project risk management still revolves around a known set of risks within organizations. The risk identification teams do not take extra efforts to identify emerging risks of the project’s supply chain.
  • While identifying risks the team stops with risks associated with direct stakeholders, leaving out the risks associated with indirect stakeholders along the supply chain.
  • Risk management of unknown risks ends by covering their consequences with the force majeure without probing into ways of unearthing and managing them.
  • Risk response actions try to manage the outcomes than addressing the root causes.
  • Lack of rigor in the usage of risk management tools and techniques which would have helped to identify the potential risks

These call for fresh approaches to risk identification and management.

Here are the 5 steps to enhance EPC supply chain reliability …. Read more

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