3 Best Practices for Supply Chain Risk Management Planning
When it comes to supply chain risk management planning, a risk can be defined as a broad spectrum of events, from counterfeit products, natural disasters, supplier delay, to theft, part shortages, production interruptions, and even cybersecurity. Every business has a different array of potential risks depending on its verticals, and each of its product has […]
When it comes to supply chain risk management planning, a risk can be defined as a broad spectrum of events, from counterfeit products, natural disasters, supplier delay, to theft, part shortages, production interruptions, and even cybersecurity. Every business has a different array of potential risks depending on its verticals, and each of its product has a different risk portfolio depending on its components. The product lifecycle is influenced by an incredible number of variables. Therefore, a comprehensive supply chain risk management planning is required, and many companies, today, are embarking on the journey to reduce the overall negative impact on the bottom line and effectively deal with unexpected hiccups. For companies that don’t have supply chain risk management plans, their primary objective should be to discover the largest risks and figure out strategies to deal with them. In this article, we have discussed some next-level best practices that can push supply chain risk management plans to another level of value and consistency.
Best Practices for Supply Chain Risk Management
Best Practice #1: Site checks must be performed
There are certain kinds of issues in supply chain risk management that can only be discovered with routine, in-depth personal visits, and an understanding of the culture where production occurs. The routine site visits are one of the most impactful methods of not only identifying supply chain risk but also help in developing contingency plans. Undoubtedly, this can be expensive and time-consuming in the case of a supply chain that reaches overseas, but the outcome can be enormous. This is one of the best practices which ensures that if there are any concerns with unsafe working conditions or quality, the companies can immediately take the necessary steps to revise their risk quantification.
Best Practice #2: Don’t neglect cyber threats
Risks are not always physical but virtual too. There are many stakeholders when it comes to supply chain risk management who assume that supply chain risks come from physical challenges, such as delay in production and shortages, but this is short-sighted. Every supply chain is built on top of IT, whether it is a bill of materials shared between the company and the third-party suppliers, or CAD designs comprising proprietary, patented designs. Therefore, for a better supply chain risk management, companies need to roll cybersecurity risk into the overall supply chain roadmap and prioritize them higher than several physical risks.
Best Practice #3: Ease out supply chain risk with insurance
Insurance companies specialize in risk quantification and working with someone can help procurement companies in their process of putting together proper contingency plans. Some insurance policies cover the own production of the company, such as a custom-built and expensive piece of equipment that would cost millions and take weeks to replace. Therefore, this best practice in supply chain risk management can enable the company to recoup many of the costs involved in case of a critical failure. There are also other insurance policies that cover issues upstream, such as delay in the supply of parts from overseas suppliers. In either case, insurance can never make up for damage to a brand, but it can help lessen the sting of a major supply chain disruption, both in-house and the other side of the globe.
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