Risk to a supply chain comes in many forms. There is the risk of part or component shortages, a security breach, and logistic delays or problems. There is even the ongoing risk of market volatility, a concern that has become even more prominent in recent years with the Covid-19 pandemic and industry-wide shortages of components such as semiconductors.
Because there are so many ways that operations can be disrupted, managing risk needs to be a priority for all supply chains.
- Understand that risk assessment and management is an ongoing process
A thorough risk assessment is the first part of any risk management strategy, but the results will not be relevant forever. As the market changes, so will the threats to your business. This is why risk management and assessment need to be an ongoing process so that you are best prepared for the current or upcoming situation. Even if your business has not changed, the state of the market or the industry may have.
You need to be fully aware of all the risks that could challenge the operation of your supply chain by mapping out all the potential threats at each point in the chain and making contingency plans for every risk you identify.
If all of your suppliers operate in the same region, then many problems that affect one supplier is likely to affect them all. This is especially true if there are travel or trade restrictions, such as we saw with the Covid pandemic. By diversifying your supply network globally, you are more likely to still have a source of components, whatever restrictions are in place.
You may also find that you can get a better price for certain components or even have better access to them by using suppliers from other countries.
- Create a network of reliable backup suppliers
You should work to have a strong relationship with all your suppliers and often businesses within a supply chain covet long-standing partnerships because it eliminates uncertainty. However, no matter how reliable your suppliers are, factors outside their control can still cause significant disruption.
For this reason, you should create a network of dependable backup suppliers for all your products or components. Even if these backups can’t offer as good a deal as your primary suppliers, they could provide you with a source for hard-to-find components in times of shortages.
- Update your business
Investing in the latest industry technology is rarely a bad thing for businesses. For one thing, outdated systems and software are far more vulnerable to security breaches which pose a significant risk to your entire operation. AI systems and IoT devices can also protect you against disruption in the future, such as when the number of employees in a workplace needs to be limited to maintain social distancing by allowing remote operation of certain processes.
These systems can automate processes such as stock ordering and administrative tasks and they can also streamline other processes that make your business more effective, which is especially important in times when cash flow is limited. Just bear in mind that each new piece of technology you introduce needs its own risk assessment.
- Maintain end-to-end supply chain visibility
Because there are so many operational stages in a supply chain, each with its own risks, it is possible that problems can occur without you knowing until it directly affects your business, even though the problem could have potentially been addressed before it reached that stage.
The sooner you are aware of issues, the sooner you can fix them and prevent them from delaying the production or delivery of the final product. This is where end-to-end supply chain visibility comes in, allowing you to track the progress of all products from raw material to final delivery. You need to work with all the partners in your supply chain to achieve end-to end-visibility and work out the best way for everyone to share and access key information.
Risk management is not a one-time task – rather, it is an ongoing strategy of continual assessment and adaptation. However, there are adjustments you can make, such as maintaining visibility, updating your technology, and creating a diverse network of backup suppliers which will create a more resilient supply chain whatever new risks are identified.