It is fair to say that there is no reward without risk, no gain without pain. This is true in various aspects of life, and none so true as in the field of business. Making money in the world of business always has an element of risk to it due to the many contributing factors that are beyond your control. One factor causing such uncertainty is that of your supply chain. In the information to follow, you will learn what is defined as your supply chain, what the risks are that you need to be aware of, and how you can manage these risks in order to continue successful in your business endeavours.
What is Your Supply Chain?
Your supply chain is the lifeblood of your business. Often more than a chain, it is an intricate network of suppliers and third parties on which your business depends. This chain is complex and dynamic, relying on various suppliers, manufacturers and processes. From the businesses that supply the products you sell, to the transport companies that ship the needed parts to make the products in the first place, each step of your supply chain is vital. Therefore, the more links there are in your supply chain, the more chances there are of risks and disruptions that have far reaching ripple effects further down the line.
What is Supply Chain Risk Management?
No supply chain is without its risks, and that’s what risk management aims to identify. So, exactly what is supply chain risk management? Supply chain risk managements involves various tools, processes and strategies that are used to identify, mitigate, and fight against supply chain threats. There are many forms of supply chain risk management, but that are all united in their efforts to protect a supply chain and often they depend on cooperation within a company’s departments in order to be successful. Although it’s impossible to expect the unexpected, forward thinking businesses need to be able to anticipate as many dangers as possible across all layers, from third party suppliers to customers.
Why Is It Important to Manage the Risks of Your Supply Chain?
Recent studies show that over the last half of a decade, almost 90 per cent of companies have experienced some supplier risk event. Evidently, the dangers are real so it’s time to take action to secure your supply chains to be able to grow in resilience and deal with whatever challenges may crop up. In the past few years, at least 1 in 20 companies have experience a supply chain disruption that cost them over $100 million in damages. The severity and frequency of supply chain disruptions is increasing all the time, so businesses need to act accordingly in order to be ready and to survive these threats. The benefits of being alert to supply chain risks are extensive. Besides the obvious benefit of staying afloat financially through turbulent times, optimisation is higher, disruptions are fewer, and reputation is made stronger. Now is the time to actively search for a solution that will help you to be prepared for any supply chain disruptions that come your way, and to prevent those that can be avoided.
What Risks Should You Be Alert To?
The list of supply chain risks grows daily, as the world becomes more unstable ecologically, financially and politically. Climate events, global warming and natural disasters are factors that affect the supply chain from an environmental point of view. Cybersecurity threats and terrorist attacks have both virtually and physically devastating consequences. Pandemics, like the recent Covid-19 disaster, have far reaching negative effects and multipolar economic systems, nation-state attacks and trade frictions all cause financial destruction. The list of supply chain risks grows all the time, and this growth does not show any signs of stopping. Therefore, a competent supply chain risks management system should do more than mitigate known risks but should intelligently give you the information and agility you need to tackle new risks when they appear too.
Tools for Supply Chain Risk Management
There are various solutions available that are helping businesses to pre-empt, prepare and prevent supply chain risks that could cause major disruption to their operations. A comprehensive supply chain risk management software program is the solution for many, and an effective one will contain a few vital features. Risk management technology should be able to spot vulnerabilities across every supplier, and for big companies that could be thousands. Cross function governance is also vital so that stakeholders can meet together to discuss both risks and improvements to the supply chain. Responsibility can’t just fall to one department but needs to be shared across various layers of your business in order to be truly successful. A good system will do more than just alert you to imminent dangers, but it will give you vital information that you can factor into yearly budget and your extensive company vision for the future. Risk management is a complex procedure that will involve many skills and tools, as well as multiple professionals and teams working together. For example, in the event of a discovery that a supplier is unethical, more is needed than simply cutting off that branch of the chain. Additional suppliers need to be found quickly and public relations need to work on the company reputation. Combined expertise is clearly needed, and a good supply chain risk management system will allow for this.
There is No Reward Without Risk
As we stated in the outset, no business can truly grow and succeed without the threat of risk and without taking a few. Even the starting of a business is a risk in itself! Therefore, as an experienced business owner you are no danger to risk. However, there are evidently tools at your disposal to help you deal with the risks that face your supply chain. If you neglect to ascertain and deal with these risks, the damage caused could be unrecoverable. Hence, it makes sense to prepare now by implementing a supply chain risk management system!