A Major Milestone in Supply Chain Risk Management

A Summary of the DoD’s First Annual SCRM Summit

Early June 2024 saw a milestone in supply chain risk management (SCRM). The U.S. Department of Defense (DoD) held its first-ever annual Supply Chain Risk Management (SCRM) Summit to discuss the SCRM Integration Framework and review current DoD SCRM initiatives. Defense programs have long experienced a uniquely powerful impact from supply chain risk, since the unavailability of just one component of a system can shut it down entirely. By the time Defense programs finally get going, they often have multiple components at risk of becoming obsolete, if they aren’t already. 

The organizers of the summit invited the NDIA to assemble an industry panel to provide their unique perspectives on how they do SCRM for their large, active, complex, and multi-tiered supplier networks. 

Key Takeaways from the SCRM Summit

First, SCRM is an enterprise-wide problem that needs a clear champion who is authorized, educated, and funded to address these issues on a wider scale. Beyond that, SCRM is also a team sport–so while it’s important to have that team captain, everyone has a role to play. All stakeholders should be engaged, understand their responsibilities, and be provided with the tools to measure their performance. 

Effective SCRM also needs to be proactive. There should be an established capability to identify and assess risks in terms of likelihood and impact. At the same time, we should keep collaboration and the mission of mutual success at the center of any SCRM discussions. 

Finally, small businesses tend to have a harder time dealing with SCRM, and need better access to the resources, expertise, and business incentives to take on SCRM processes and comply with policies and regulatory requirements. 

The SCRM Panel

Each of the SCRM experts on the panel had the chance to give their perspectives on the same four questions. 

• Describe your SCRM journey and current “best practices”.

All agreed that the traditional reactive approach to supply chain management simply cannot meet the current need, especially in the highly regulated acquisition environment of the DoD. Even proven and innovative commercial SCRM processes struggled to find success when it came to Defense programs. And as new processes are standardized and automated, they can have a negative impact on current best SCRM practices. This is important to keep in mind as the DoD considers what really should be considered the best SCRM practices for Defense programs. We also reported that the recent pressure to engage small and medium-sized businesses poses a considerable risk to Defense Programs in terms of supply chain. These businesses are always challenged by resources, capacity, and talent, especially in cybersecurity and contractual flow-downs. 

• What are any critical success factors that you have discovered?

Vertical integration and the acquisition of downstream capability was one proactive step, where the company assessed the criticality of a product and then co-invested in the capability or brought it in-house. Another strategy was to become a more integrated enterprise using centralized information management that involved gathering current market trends and related data that can be analyzed to determine future supply chain risks. The panel also noted that risks and mitigation strategies change over time–what is considered a viable strategy may become a problem in the future. They recommended a policy of ‘safe harbor’ to protect against having past acceptable decisions becoming current issues.

• What are the challenges you’re facing, internal and/or external?

Many of us had experienced troubles identifying the critical risks across the large and complex programs that we managed, as well as in collecting and sharing the necessary data surrounding these risks across the network of stakeholders. Funding SCRM programs is also challenging, requiring us to combat the culture that has developed over decades of government contracting. In addition, while there are many different people with excellent ideas on how to approach SCRM, this also means that there are many different voices and priorities with mismatched objectives, causing complications and conflict that can impede program action. 

• What help would you like from USG to overcome challenges?

We concluded the panel by providing several actions that the DoD could take to support SCRM initiatives, such as changing the way approach SCRM, avoiding stoppages, and challenging the notion that suppliers have to provide a full BOM. We also recommended that the DoD start small in their efforts and then build upwards from there, adapting policies to soften the impact of the changes and providing flexibility in their contracts. A collaborative and cooperative approach to supporting SCRM objectives and incentivizing desired behaviors will encourage and engender wider cooperation and compliance.

Final Thoughts

The SCRM Summit was the result of many months of our collaborative efforts to shine a light on the impact and importance of supply chain risk management, and the need for improvement in SCRM for Defense programs especially. If you remember only one thing from this panel, let it be this–you have a role in SCRM, no matter how big or small. Taking responsibility for that role is the first step that you can take to help ensure sustainability for your business.