Understanding supply chain risk

From http://www.mckinseyquarterly.com/article_page.aspx?ar=1847&L2=1&L3=26&pagenum=1

In a survey conducted by McKinsey, the enormity of the risk associated with the supply chain is on a rise. The executives most likely to say that their company's level of risk has risen are those in retailing, manufacturing, and energy; those in the energy industry are by far the most likely to say their risk has increased significantly

The executives rank labor, regulation, and suppliers as the top three supply chain risks on which they focused during their most recent round of planning. Among all risks, the clear leader is the availability, cost, and quality of labor. They are primarily concerned about the availability of well-trained labor. Indeed, though the level of concern varies somewhat, a shortage of high-quality employees remains the top issue among those concerned about labor, regardless of their company's size or location. Among those concerned about labor, labor cost is their biggest worry; only 3 percent of them cite labor disruptions and less than 1 percent of those surveyed cite diseases or pandemics.

What are companies doing to mitigate their increasing risk? Executives cite a range of actions; of these, entering into performance contracts with suppliers is cited most often. Actions that could mitigate labor-related risk are rarely mentioned. The degree of disconnection between risk and its mitigation may be one reason that executives rate fairly poor their company's ability to mitigate their key supply chain risks, 39 percent say they are at best slightly capable of doing so.

Executives say they're making surprisingly little use of some well-known tools and techniques that could help them assess the business landscape and manage risks more effectively. For example, more than half of all respondents say their company either undertakes no formal risk assessment or conducts only a qualitative assessment