Smart business people heed their gut. Smarter ones validate their gut with data.
This definitely applies to assembling productive supply chains. One's gut tells you to put your plants and distribution centers near raw materials, important markets, and affordable labor, and then consider costs like real estate, construction and regulatory compliance.
All important criteria, but none of it reveals how fragile or resilient your supply chain is—that is, whether it's able to withstand disruptions and keep you in business. Create a fragile supply chain in an otherwise perfect location, and it could cost you dearly in reputation, market share and overall value.
Often you'll have two or more adjacent countries offering a similar set of resources but different levels of resilience provided by their business environments. You can actually quantify the country-by-country resilience a nation offers—or doesn't—as you select or evaluate locations of your operations, suppliers or customers.
Here are 12 quantifiable variables that are updated annually. See why each matters, and where you can look for insight on that variable. They're grouped into three buckets: economy, risk quality and supply chain.
|Exposure to natural hazards||Quality and enforcement of building codes as it relates to natural hazards.||FM Global Resilience Index|
|Natural hazard risk quality||Quality and enforcement of building codes as it relates to natural hazards.||Resilience Index|
|Fire risk quality||Quality and enforcement of codes as it relates to fire risks.||Resilience Index|
|Inherent cyber risk||Vulnerability to cyber attack
and country's ability to recover. Look at internet penetration
and civil liberties. Free
societies are generally better
at resisting cyber crime.
|United Nations and Freedom House|
|Productivity||A strong economy is a sign
of a resilient one. Look at
GDP divided by population.
|International Monetary Fund|
|Political risk||Could the government be destabilized or overthrown? (Not good for business)||World Bank|
|Oil intensity||Determines vulnerability to
an oil shock. Consider oil consumption divided by GDP.
|U.S. Energy Information Administration|
|Urbanization rate||The faster the urbanization
rate is, the higher the
potential stress on infrastructure.
|Control of corruption||Perceived extent to which public power is exercised
for private gain.
|Quality of infrastructure||Transport infrastructure
(road, rail, water and air)
and utility infrastructure.
|World Economic Forum|
|Corporate governance||Strength of auditing and accounting standards,
conflict of interest regulations, and shareholder governance provide insight into local supplier quality.
|Supply chain visibility||The ability to track and trace consignments across a country’s supply chain.||World Bank|
FM Global has scored and ranked 130 countries and territories by these variables to derive national resilience rankings. The top three most resilient countries in the current FM Global Resilience Index are Norway, Denmark and Switzerland; the bottom three are Ethiopia, Venezuela and, at the bottom, Haiti, though the countries that matter most to your business are sure to be different. It's worth knowing how they rank.
If you're ambitious, you can make your own index for the countries you're looking at, or select a handful of variables (these or your own) and see what you come up with.
The important thing is confirming that your gut has you on the right track by using data to drive your decisions.
As originally published in Supply & Demand Chain Executive.