What are supply chain risks and mitigation?
Increasingly complex business models and units have given rise to a new set of significant challenges, roadblocks, and companies’ issues across industries. Complicated supply chain structures and changing market dynamics have further caused the upsurge of supply chain risks and complexities, furthering the need for strategic planning and data-driven decision-making. As companies become privy to the rising dangers within their markets, they choose to invest heavily in addressing problem points and fixing issues as they appear. However, to succeed in a fast-paced and rapidly evolving market, it is important to stay ahead of the curve and develop sustainable preemptive strategies that address challenges before they occur. The need for an accurate forecast, well-informed strategy, and data-driven plans has led to increased investment and interest in supply chain risk management (SCRM), encouraging companies to identify, evaluate, and mitigate risks before impacting the supply chain or organization. Identifying and mitigating risks is a time-consuming and complicated process and requires an in-depth understanding of the steps needed.
How do you mitigate risks in the supply chain?
Identify, Evaluate, and Prioritize: In a set of complex procedures, systems, and processes, forecasting, identifying, and assessing potential risks can be challenging. However, companies must leverage a team of experts to utilize data regarding previous supply chain complexities, changing market dynamics, and other factors that may affect their operations and use it to mitigate these risks. Companies must also conduct an in-depth evaluation of the risks and prioritize them according to their potential monetary or operational impact. This will help gain an organized and well-informed perspective into the current and potential hazards in their company and address them promptly. More significant risks must be addressed at the earliest, and minor issues can be tackled as operations continue.
Assess Suppliers’ Impact: For any organization, suppliers play a crucial and significantly intertwined role in procurement, sourcing, or any other supply chain process. Therefore, assessing their potential impact on the supply chain and products is an imperative tenet of the process. As companies grow and larger contracts are negotiated, supplier relationship managers should also check the quality of products delivered, identify secondary suppliers to overcome unexpected challenges, and consciously calculate the potential risks introduced by suppliers and contracts. Companies must prepare for product delays, non-compliance with company policies, regulatory challenges, natural disasters, and economic or political challenges. These supply chain risks can significantly hamper companies’ productivity, profitability, and market share if not appropriately addressed.
Collaborative Risk Planning: Understanding and tackling supply chain risks is a collaborative and interdepartmental activity that multiple teams must carry out collaboratively. Procurement officers, sourcing teams, supplier relationship managers, supply chain managers, and risk management teams must exchange relevant data, changes, and practices to preemptively identify and minimize the impact of potential risks along the supply chain. These risks can equally impact production, packaging, and other departments. A lack of coordination can lead to risk management professionals failing to find, assess, or remove risk factors in certain departments, eventually causing challenges along the complete supply chain. All departments must also be actively involved in the planning and executing processes, making it easier to develop, understand, and implement the various risk management strategies across the departments.
Ensure Transparency: Clarity, transparency, and visibility are essential to the successful functioning of a supply chain, making it increasingly necessary as companies expand. Ensuring transparency includes developing strong, beneficial, and vital communication guidelines to make all relevant professionals and departments aware of significant business unit changes. Additionally, providing stakeholders with relevant data and information regarding functionality, operations, and procedures can help maintain clarity within the company and highlight factors that other teams fail to address. This transparency is not limited to potential supply chain risks but includes other major changes or projections and requires precise tracking, assessment, and data transfer across departments.
Track, Assess, and Review: Constant external and internal changes and rapidly evolving markets lead to various risks that rise and decline as companies continue to grow. Risk management requires constant tracking, assessment, and revision of implemented strategies and potential risks. Therefore, supply chain risk management is considered a continual procedure that must be revised and researched frequently to stay ahead of the curve and ensure it is prepared. Businesses must track, evaluate, understand, develop new strategies, or modify previously implemented strategies to accommodate any changes or unknown risks. As risks continuously become prevalent and are slowly minimized or mitigated, companies must prepare for the next major roadblock to overcome.
Success Story – SpendEdge Advantage
Struggling to keep pace with the constantly evolving risks and challenges within the organization and market, a renowned pharmaceutical manufacturer witnessed a significant decline in productivity, speed-to-market, and profitability over two years. While the manufacturer continuously developed strategies to address prevalent challenges, it always caught another issue shortly. Aiming to contain or mitigate these obstacles sustainably, the pharmaceutical company chose to partner with SpendEdge and leverage our expertise in offering supply chain risk management strategies. With insights from our risk management team, the company identified, evaluated, understood, and developed comprehensive plans to mitigate their risks. The pharmaceutical manufacturer found and negotiated contracts with secondary suppliers, mitigating the common challenge of delayed shipment, supplier non-compliance, and other external challenges. They also tackled various other potential major and minor risks in their production and procurement departments. The pharmaceutical manufacturer successfully identified and mitigated their supply chain risks, developed sustainable risk management strategies, restored productivity and profitability, and significantly improved their speed-to-market.