Knowing the risks – mitigating and responding for success
Risks are a part and parcel of life and are in fact involved in everything we do. Some people are very risk adverse and refrain from doing anything that has any risks associated with it. Others thrive on risk and seek out adventures aiming at the potential reward. In the case of supply chain risk assessment, there are many decisions that though risky, could result in significant benefits to the company. How companies manage those risks and distinguish between those who succeed from those who fall short is critical. Companies that take risks and prepare for them are likely to be more successful, provided they have an appropriate risk mitigation strategy in place. But having a mitigation strategy is not enough. It is also essential to possess strategic competency in responding to the unexpected. This ability includes a combination of agile processes and tools that allow companies to recognize an event, assess the impact, and respond accordingly.
Why is Supply Chain Risk Assessment Important?
Supply chain risk assessment is the coordinated effort of an organization to help identify, monitor, detect and eliminate threats to supply chain continuity and profitability. It involves taking a comprehensive approach to identification, analysis, and management of risks in a continuous process to manage risk throughout global supply chains. Supply chain risks can threaten the very existence of a company. This is one of the main factors for executive boards and business managers to expect enhanced risk management programs from their procurement, supply chain, and logistics departments.
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Steps to Develop a Successful Supply Chain Risk Assessment Process
Define stakeholder concerns: Shareholders, customers, and employees dictate how companies compose their downstream and upstream operations. Building good customer relationships and other stakeholder relationships is known to affect a company’s shareholder value positively. Identifying and planning strategies based on what the stakeholder of the company cares about is the first steppingstone to success.
Supplier and risk evaluation: Once the stakeholder’s needs and concerns are identified, supply chain managers can assess the factors that will hinder the business from accomplishing those goals. Supplier identification involves understanding how upstream partners conduct operations. This includes determining which materials manufacturers use to develop goods.
Formulate risk mitigation strategy: An efficient supply chain risk mitigation strategy utilizes three resources: people, processes, and technology. Each of play a prominent role in analyzing the data gathered from suppliers. Therefore, it’s important for enterprises to establish an infrastructure dedicated to continuously collecting, interpreting, and acting on information.
External partnerships: It is vital for companies to partner with external parties like third-party auditors and data collection agencies. The primary advantage of partnering with a data collection agency and third-party auditor and is that it can dedicate the bulk of its resources to collecting and validating supply chain data. Their businesses are built on delivering procurement analysis services, so they have a wide variety of incentive and capabilities to conduct supply chain analyses efficiently and thoroughly.
Evaluate outcomes: After companies identify how they can mitigate risks; they must then confirm and establish the efficacy of specific threat-reduction efforts. Companies must compare the expected outcome against the actual performance. This will help them identify gaps and rectify them quickly.
Supply Chain Risk Analysis for a Sand Mining Company
Challenge: The client, a leading player in the sand mining industry wanted to reduce production delays, productivity losses, and bottlenecks.
Benefits offered: Helped the client optimize the supply chain design, improve shipment visibility and control.
Developing a competitive supply chain risk assessment process is crucial for companies to develop effective strategies. Stay ahead by requesting service on our procurement platform to gain the latest insights into procurement risks.
SpendEdge shares your passion for driving sourcing and procurement excellence. We act as a global strategic partner for leading Fortune 500 firms and other leading companies across industries. Our strength lies in delivering robust, real-time procurement market intelligence solutions that help sourcing and procurement professionals make informed decisions. Our innovative procurement solutions also help enterprises transform structural capabilities, improve execution efficiency, and fast-track time to savings. Every business needs smart procurement intelligence to stay at the top of their game; we provide actionable insights utilizing lean methodology to help enterprises make better purchasing decisions. We offer businesses with the precise combination of resources, tools, and techniques to help them redefine sourcing and procurement capabilities. We cover a broad spectrum of industries starting from pharmaceutical and life sciences to transportation with expertise in supply market intelligence, spend analysis and benchmarking supply chain risk assessment, and category management.