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Supply Chain Risk – Identification, Assessment and Mitigation

Jul 10, 2017

Do you know what are the risks involved in supply chain management? Can you spot the supply risk and devise supply chain risk management strategies to mitigate them? Have you identified the tools and techniques to mitigate the supply chain risks? Why is it so important to have a contingency plan in place, you ask? Here’s why. Supply chain is the backbone of an organization that ensures smooth process flow, regular procurement schedule, optimum inventory levels, timely delivery and helps balance the demand-supply factors.

Organizations often indulge in best cost country sourcing and other procurement and supply chain management practices to identify cost saving opportunities. Seldom does the management realize that these supply chain management practices entail several supply chain risk varying in degrees of severity and frequency. Thus, it is essential for supply chain professionals to conduct a supply chain risk analysis and have a contingency plan in place. But first, the company must conduct a supply risk analysis to identify and assess the factors that could wreak havoc in the value chain process and then devise risk reduction strategies.

Supply Chain Risk Assessment – What and why?

Risk is an outcome of an uncertain process or activity. With the dynamic market conditions and growing presence of technology throughout the supply chain, risk assessment become inevitable for the organization to secure its value chain. In simple words, supply chain risk assessment is a process to identify the procurement risks, their potential outcomes and devise strategies to mitigate them. It entails monitoring real-time trends, conducting a supplier risk analysis and forecasting the pricing trends. To ensure supply chain security, organizations must identify the key stakeholders and their associated risks, analyzing their supply capacity and its impact on overall pricing.

Identifying Supply Chain Risks

Thanks to inter-connected and global supply chains, the procurement and supply processes have become highly complex. These value chain risks affect the internal as well as external stakeholders such as employees, shareholders, suppliers, contractors, consumers and government. One of the major risk is to choose a viable supply management strategy that suits the organization process. Supplier risks involve being aware of the product’s provenance, shipment and delivery schedules and supplier’s internal processes. This is critical as the organizations must know the conditions under which their suppliers operate and the security set up around it. This helps to establish a delivery lead time, supplier performance levels and address the demand and inventory fluctuation uncertainties.

Risk Management in Logistics and Supply Chain

Managing risks in supply chain is crucial for the organization to ensure procurement regularity and smooth flow of value chain operations. They must devise strategies based on supply market insights to protect its procurement and ensure a seamless supply chain management. How to manage risks in the supply chain, you ask? Here are few points that you can keep in mind.

  • Choose a supply management strategy that fits your business model and ensure supply chain visibility, identify potential bottlenecks and take the required action.
  • Set acceptable quality standards, communicate the same with the suppliers and ensure they comply with it.
  • Identify the supplier capacity and related issues, work together to minimize risks that could thwart production and overall performance.
  • Stay vigilant and monitor the supplier’s conditions to avoid delay caused by financial issues, labor union strikes and government instability.

SpendEdge helps organizations understand their supply chain processes with the help of supply market insights that helps them to identify cost saving and risk reduction opportunities and enhance their supply chain visibility.

To know more about supply chain risk assessment and its impact on your value chain

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