Risks in Supply Chain Management
When businesses branch out in the international market, conducting proper supply chain management is a hectic but essential task. This is because every market has its nuances and thorough analysis is necessary to gain a clear understanding. Moreover, a company’s supply chain is directly related to its customer service, product quality, maintenance of operation costs, generating cash flow, etc.
As per a recent survey, 57% of companies believe that supply chain management gives them a competitive edge. Thus, any issues in this system can make the company’s business unsustainable.
To Mitigate risks in Supply Chain Management in different countries, organizations can take help from supply chain consulting firms. They help analyze the market and suggest administrative and inventory optimization to facilitate seamless management and reduce the chances of breakdowns.
Types of Risks in Supply Chain Management
Now, when it comes to risks in supply chain management, they can be of several types. Some of the common ones are:
One of the biggest supply chain risks that multinational organizations can face is financial risk. They can occur due to several factors like supply shortages, unexpected demand, unfavorable exchange rate fluctuations, budget overruns, and more.
Legal complications usually include issues related to intellectual property misuse, misinterpretation of contractual obligations, not meeting terms and conditions requirements, etc.
High inflation rates can cause an unpredictable rise in product and service prices. As a result, the cost of raw materials and energy used for manufacturing goods also appreciates. This leads to an overall price rise in all aspects of the supply chain, thus increasing the cost of running a business.
Natural disasters like floods, earthquakes, tsunamis, etc. can occur at any time without forewarning. Incidents like these can cause damage to property, life, etc. leading to the interruption of the entire supply chain.
While sourcing raw materials, suppliers or contractors can cause harm to the environment in the form of emissions, discharges, and other types of waste. These fall under environmental risks and can cause unforeseen accidents, which can damage a company’s reputation and business.
Best Strategies to Mitigate Risk in Supply Chain
As per industry experts, supply chain disruptions can cause a massive 62% loss in finances.
To deal with the various supply chain risks, businesses need to perform risk analysis. It is a process that involves the investigation, identification, and assessment of risks in a company’s supply chain and implementation solutions for their mitigation.
Doing so enables organizations to gain quick relief from supply chain disruptions and restore normalcy to their operations.
Some of the top supply chain risk management methods are as follows:
The Prevention Preparedness Response Recovery (PPRR) model is one of the most popular supply chain risk management strategies. It involves taking precautionary measures, developing a contingency plan, executing it to mitigate the risk, and then resuming operations to get things back to normal.
Following this risk management model will enable companies to follow a systematic approach in case of supply chain disruptions.
- Conduct Logistics Planning
For international organizations, having just one supplier can be risky. This is because various geo-political events, global pandemics, and other macroeconomic factors can disrupt logistics networks. This can bring the supply chain to a standstill, causing the entire business to shut down.
Thus, having a diverse supplier network is of utmost importance. In case one shuts down due to one reason or the other, the rest can keep operations running till a solution is found.
- Choose Suppliers with Due Diligence
Having the right suppliers is crucial to maintaining a smoothly running supply chain. Thus, before providing contracts, companies must check several factors like financial stability, service history, compliance with regulations, goods quality, scalability, etc.
By doing so, organizations can have a better understanding of their contractors’ capabilities, enabling them to reduce risks.
- Set Cyber Security Compliances
As most companies conduct at least some part of their operations online, cyber threats can be a big issue. Now, it is not possible for organizations to control the cybersecurity measures taken by their supply chain partners. So, to minimize risks, businesses can set cybersecurity compliance standards.
Doing so will compel all the members of a supply chain to implement a particular level of cybersecurity which can help minimize cyber threats.
- Document and Prioritize Risks
Now, the best way to deal with future risks is to learn from past incidents. So, each time a supply chain issue occurs, organizations can document them and calculate the impact of each on their finances and brand value. Then, they can start making contingency plans for each of them, starting with the most high-risk scenarios.
Timely risk analysis enables firms to optimize their resources, maintain good cash flow, improve the confidence of their stakeholders, and take their business to new heights. However, for international firms, conducting operations in multiple markets and employing supply chain analysis at the same time, can be a very hectic task.
In this regard, opting for supply chain consulting services can be the best course of action.
How do Supply Chain Management Consulting Firms help with Risk Mitigation?
Supply chain management consulting firms like Tecnova provide services that can cater to all the needs of a company’s supply chain. They provide vendor development services, via which organizations can team up with reliable suppliers for sourcing goods.
These firms also conduct operational analysis and inventory management to optimize the performance of their client’s businesses and make them perform to their full potential. Furthermore, they offer supply chain outsourcing advisory services to ensure that organizations keep running without any breakdowns.
Reference
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