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How to Identify Supply Chain Risks and Manage Them?

How to Identify Supply Chain Risks and Manage Them?


You might have planned everything related to your company’s logistics and supply chain management, right to the minutest details. Yet, there are times when implementation does not function smoothly as expected, due to unpredictable events. Be it a natural disaster or human-error mistakes, supply chain risks might endanger the sustainability of your business.

It is crucial for every business leader, to identify the supply chain risks and prevent pitfalls that could be caused due to loopholes in the system. Building business relations across countries is a great milestone for every company. With advancements in technology, globalisation has blurred boundaries for businesses to engage and join forces more easily. Nevertheless, it also makes logistics and supply chain management more complex than ever before.

If you are a supplier, shipping commodities abroad means that there will be more processes and obstacles before goods arrive at the clients. Similarly, when you purchase raw materials from suppliers outside the country, it will take complex and lengthier process than when you conduct local transactions.

Not only the distance, other factors such as natural hazards and fires could make your supply chain more vulnerable. While, you might still be able to control the internal risks, there are times when you have to deal with external risks on which you have no direct control.

Now imagine when you cannot deliver the products on time to the client due to various technical reasons. This will impact negatively on your company’s reputation along with other consequences, such as contractual penalties, the supply bottlenecks, or sudden sales slump.

If you do not want this to eventually happen, then you should be prepared with an inclusive risk management plan. Here are some things you can do to identify supply chain risks and manage them effectively:

First, you have to analyse your existing risk management. Pay close attention to your supply chain process to find out which sectors require attention. Do not leave any loopholes unaddressed as this might lead to serious problems in the future.

Investigate all sections within your supply chain, such as the service provider, supplier, commodity, destination country’s geographical structure, as well as logistics infrastructure. Since you cannot do all the work alone, ask for help from your staffs to watch over each section and location associated with the supply chain. Ask them to send reports and updates about the possible risks, so you can manage them better.

Second, you have to evaluate the data. When you have clearly defined the sections that should be monitored along with reports collected from your team, the next best thing to do is to scrutinise the data available. Make a risk scorecard to measure insecurity levels of a particular process in the supply chain.

Through this method, you can enlist the priorities regarding sections that should be addressed first. Make sure that you know the root cause of the problem, since potential risks in a particular section might bring domino effect to impact other departments of the organisation as well.

Third, you have to use automation. Supply chain risk management is not something that can be done only once, since monitoring needs to be conducted continuously. Given the breadth of surveillance field that should be observed, you can use automation to analyse the data collection. Thus, you can identify supply chain risk immediately.

Fourth, you have to integrate supply chain risk management into the organisation. Assign people with high determination as well as define their roles and responsibilities clearly within the process.

Risk management is a must-have strategy for companies engaged in logistics and supply chain. By observing and analysing the gaps between the processes, the root causes can be found and preventive measures can thus be taken.

This article was first published here.