Muda. It’s the Japanese word for waste and the enemy in modern supply chain management and manufacturing. Since the 1980s, lean thinking has revolutionized the way businesses operate by seeking to eliminate muda and free capital held in wasteful assets—that is, assets that do not add value to the overall process (e.g. excess inventory or underutilized equipment). Lean thinking is important and helps businesses to improve their processes and their bottom lines. It does however beg one key question that risk managers and business continuity professionals must ask: “how lean is too lean?” Wantonly cutting out all perceived muda to save money can actually have the opposite effect down the road. Organizations with global supply chains inherit significant risk due to the potential impact associated with a supply chain disruption. In some cases, a disruption could threaten an organization’s ability to continue business or require large amounts of capital to recover. Organizations must fully examine their processes and supply chains to identify risk and make informed decisions on how lean is too lean.
This perspective—the third in the Risky Business Series—leverages a case study of the recent west coast dock worker strike to demonstrate the inherit risk of a supply chain that is too lean due to a virtual monopoly. This article also revisits evaluation and mitigation strategies from the first two Risky Business perspectives that organizations can use to reduce risk to an acceptable level. Continue reading