Supply chain management is largely about interconnectedness. When planning for and managing the sourcing, procurement, conversion and logistics related to your product offering, companies need to create the right relationships with the right companies. This will help to optimize the movement and storage of materials and inventory while at the same time preparing for disruptions. Striking the right balance is not easy.
If you stretch your supply chain too thin, you subject it to vulnerability and leave room for disruption in your operations. If you don’t actively seek ways to improve your supply chain and its processes, you’re missing out on the ability to make related operations run more effectively and efficiently.
Globalization and new market realities that allow just-in-time manufacturing, outsourcing and lean manufacturing have further complicated supply chain management. While it brings great opportunity to companies big and small, it also brings considerable risk. If you do it right, a flexible and optimized supply chain can not only free up resources within the organization, but it can also decrease the cost of goods and increase the number of markets that you can occupy. However, mismanage your supply chain, and a disruption can decrease revenue and market share, and can increase costs considerably.
When one of the links in the chain fails, what do you do?
Yossi Sheffi‘s book ‘The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage‘ shows us that it is a balance between increasing security and boosting resilience that will help reduce disruption and help in building the ability to bounce back quickly. Managing the risks associated with your supply chain should be a task that closely relates to your business continuity planning and disruption management. Any size disruption in the chain can upset revenue on a large scale if you aren’t prepared to make alternate arrangements. Proactively managing your supply chain risk begins just as any other risk management planning begins:
Identify your risks
Prioritize the identified risks
Develop a strategy of how you will manage these risks
Implement and execute the plan as necessary
Monitor and evaluate your use of the plan
Insurable risks like fire, accounts receivable and employer liability should be important to your supply chain risk management, but don’t forget to consider the non-insurable risks as well. Preparing to manage strategic risks like company and brand reputation and regulatory compliance should be part of your supply chain risk management plan.
ClearRisk's claims, incident, and risk management system enables organizations to monitor and control these risks among many others. Want more information?
If you found this article helpful, you may be interested in: