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6 Major Causes of Supply Chain Risk and Ways to Overcome Them

Nov 28, 2018

Supply chain risk is an inevitable component of a business, and these risks evolve and become more prevalent with time. In this dynamic scenario, yesteryear’s supply chain risk management strategies often prove to be ineffective. Businesses having a poor grasp of hazards in the supply chain will increase freight spend and diminish the brand value. However, having an idea about the supply chain risk that companies endure in the global market will help reduce their impact. This will also enable shippers to mitigate the likelihood of occurrence and minimize disruptions simultaneously.

Unfavorable weather conditions

Extreme weather is a significant supply chain risk to ocean freight activities. Tropical storms can prove disastrous for ocean carriers. The recent reports on the global climate change indicate tropical storm threat is on the rise. One of the ways in which shippers can avoid such supply chain risk is through re-evaluating ocean route used and determining which carriers can increase shipping in anticipation of tropical storms.

Connectivitysupply chain risk

In the age of modern trade, supply chain risk exists within the connectivity of systems. The integration and modification of systems increase the risk even though systems can be integrated through an open-source software. Furthermore, poorly integrated systems could lead to bottlenecks and disruptions in the supply chain. To stay prepared for such contingencies, companies must create a backup data resource and decentralize the data storage. It is also vital to ensure that the system connectivity is on a secure network. Furthermore, companies must give emphasis to avoid unnecessary modifications, and work with expert supply chain systems’ integrators in order to maximize profitability and efficiency.

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Data integrity

Data integrity is concerned with the quality and strength of data for use in supply chain management. Any discrepancy in data could leave shippers with reduced profitability and could result in increased supply chain risk and failure. To overcome such instances businesses continuously validate data for accuracy and timeliness. Furthermore, resorting to systems that leverage real-time data monitoring can be a crucial step in increasing data integrity and quality.

Economic instability

Economic instability in the global economy represents a major threat to global trade. For example, incidents such as the bankruptcy of Hanjin Shipping (South Korea’s 7TH largest shipping company) led to a dramatic reduction in global supply chain shipping capacity. Such instances can be overcome by increasing the employment rates in countries that the business operates in. Companies can launch apprenticeship programs, encourage supply chain careers among secondary-school students, and engage with the community.request proposal

Supplier consistency

Supplier inconsistency is an essential element for eliminating supply chain risk. So, the procurement department in the company must take full responsibility of ensuring supplier consistency. Creating a diverse supplier network is a recommended way of doing this. Additionally, it is advisable for companies to expand available carrier routes to meet changes in suppliers used.

Cyber-crimes and attacks

In recent years, cyber-attacks have become one of the major supply chain risk concerns for companies. Such illegal activities could pose a predominant risk to the entire supply chain management process of the company. In the case of a cyber-attack, someone with a malicious intent could bring down entire supply chain networks and force freight rates to skyrocket. To save themselves from such malicious attempts, businesses must choose supply chain systems’ vendors with a proven record of maintaining stringent cybersecurity protocols. It is also critical to limit personnel access to the system to those necessary for shipment processing and maintain the strong physical security of your facilities. Moreover, establishing penetration testing and having a strong IT team can also help reduce the risk of cyber-attacks.


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