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| Supply chain risk management |
Supply chain risk management should be an integral part of any
good supply chain. Without it the supply chain is vulnerable to disruption
which can be potentially disastrous.
When an important customer fails, it can cause considerable damage
to its suppliers. It is however possible to take out insurance against this
type of eventuality. However, what is often less considered is the significant
effect that a supplier failing can have on its clients. Whatever product or
service that failed supplier was providing, be it engineering parts logistics
services etc. - it's something that needs to be built into any good supply chain risk management program.
In looking to be prepared to meet this type of supply chain risk management challenge,
there are five key areas that need to be taken into consideration.
Getting to know your
supply chain partners
Knowledge is all-important, and this is particularly true
when it comes to having in-depth knowledge of all areas of your supply chain.
Take your suppliers, for example. Have you ever considered who your most
critical suppliers are? When you stop to analyze this in greater depth, the
answers may not be those you might first think of. You need to look beyond the
mere supply of a product or service, and also take into account any financial,
operational, and sales channel implications when making this judgment.
If this information is not already available in your supply chain risk management program,
you need to act to make it so. You should query your existing suppliers, and in
future, add this type of information to become a standard part of the tendering
process. That way you will gather the appropriate data automatically on any
future potential supply chain partners.
Taking
outsource-suppliers and subcontractors into your supply chain risk management
profile
If
you sub-contract or outsource any particular functions of your business, the
suppliers who provide this service must be included in your supply chain risk management profile.
For example, any IT suppliers or accounting companies that provide you with
payroll services could cause serious repercussions to your organization if they
fail to perform. In the construction industry for example, subcontracting labor
is a common practice. It is also one that can cause serious disruption if it
fails for one reason or another. Making sure to capture these types of
outsource-suppliers or subcontractors is therefore essential to any supply chain risk management program.
At what cost does cost
cutting come?
For many businesses, making cost savings and achieving
economies of scale is the prime consideration. All too often this pressure and
burden is passed onto suppliers. But without proper thought, gaining a
short-term advantage can hide significant potential future disruption. If
suppliers are brought to their knees and are unable to continue production, and
are perhaps even forced into insolvency, this can have disastrous consequences
on any supply chain. It can cause stock-outs and lost revenues. It can lead to
potentially losing customers forever if they are forced to seek alternative
sources. Any supply chain risk
management program must therefore seek to determine the resiliency of
buyer/supplier relations.
Knowing your suppliers
How well do you know your suppliers? Who are their suppliers?
How many customers do they have? Are they over reliant on any one particular
client? All of these things can expose your supply chain to substantial risk.
Therefore part of your supply chain risk
management strategy must be to get to know your suppliers and their
strengths and weaknesses.
Disruption recovery is
an important part of any supply chain risk management program
It is to be hoped that your supply chain will never be
seriously disrupted. However, the truth of the matter is that disruptions are
likely somewhere along the line. Making plans for such disruption within your
supply chain risk management program is essential.
You need to think in terms of how any such disruption can be minimized.
You might for example need to think about adjusting production schedules.
Alternatively, you might need to consider multi-sourcing of products to ensure
you are not totally reliant on any one particular source. Putting all your eggs
in one basket has never been good policy.
Information is the key
Whenever you are considering shaping your supply chain risk management policies, information is the key. You can
never have too much of it; providing of course it is appropriate information.
The right information, in the right place, at the right time, can help you to
avoid major cost disruptions and serious potential damage, not only to your
supply chain, but to the business health and well-being of your organization.
What are the 3 biggest risks that can potentially
disrupt any supply chain?
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