5 Ways to Enhance Your Supply Chain Risk Management Strategy
Minor supply chain mishaps can trickle down into major financial setbacks that disrupt the core of your company. Leave it unchecked, and your entire business could suffer tremendous setbacks.
Gartner’s poll shows supply chain departments need a robust risk management strategy. Sounds like a bunch of fancy words, but when you get into the ‘trenches, how do you strategize to mitigate supply chain risks as comprehensively as possible?
Continue reading this blog, not only the how but also the why and what.
What is a Supply Chain Risk Management Strategy?
A supply chain risk management strategy is a set of tactics designed to help you prevent and contain vulnerability surrounding your supply chain business or department.
Since enterprises in this industry vary, you’ll have to tweak your strategy to suit your supply chain’s unique challenges. However, the common risks supply chain management might face are:
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Cybersecurity threats
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Currency volatility
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Supplier bankruptcy
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Regulatory changes
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Market demand changes
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Geopolitical unrest
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Labor disagreements
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Quality control issues
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IT infrastructure failure
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Natural disasters
You want to avoid each of these situations. This is why a strategy is so crucial, so you don’t have to struggle but call on the right solutions, tools, or experts for a swift solution.
How to Approach Strategizing for Supply Chain Risk Management
Generally speaking, a lack of innovative tech solutions in supply chain management can result in bottlenecked operational methods with lasting impacts like overstocking or understocking, lost revenue, and other associated risks.
Therefore, integrating the right technical solutions and SCRM plan should be the basis of the approach to strategic supply chain management. Smart solutions having AI, machine learning, and cybersecurity features help safeguard enterprises and ensure they understand the massive data generated by multiple sources along their supply chain.
With this new and improved insight, leaders can better adjust their strategies to maximize the strengths of their supply chain while mitigating weaknesses with the following five strategic measures.
5 Tips to Improve Your Strategy for Mitigating Supply Chain Risk
1. Assess and Identify Risks
Symantec reports that supply chain attacks rose by 100% in 2021 compared to the previous year, underscoring the significance of detecting and evaluating risks as soon as possible. The goal of this process is to identify potential risks that could disrupt your supply chain and assess their likelihood and seriousness.
Do not be alarmed; you will not need to consult a crystal ball to identify supply chain threats. You can, however, take certain actions to help recognize such hazards. These techniques could include doing supplier audits, employing tech tools for data processing, or simply having open discussions with your vendors.
To help evaluate risks, raise relevant questions like:
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How much harm may an event cause to your company?
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How likely is it that this event will occur?
2. Employs the PPRR Risk Management Model
Businesses all over the world apply the PPRR risk management approach, which is a widespread worldwide supply chain risk management technique. “PPRR” is an acronym for:
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Prevention: Take preventative action to reduce supply chain risk.
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Preparedness: Create a backup plan and put it into action in case of a crisis.
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Response: To lessen the adverse effects of the disruptive event, carry out your backup plan.
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Recovery: Return to business as soon as possible and get everything functioning smoothly.
3. Diversify Suppliers
One of the best ways to reduce supply chain risk is to diversify your suppliers, as seasoned CFOs are aware. Naturally, your safety net will increase with more providers you have dispersed over various areas. You’re dancing with fire if you rely solely on one source.
Your supply chain becomes more resilient and flexible when you have a variety of suppliers. You have alternatives if one supplier fails or a whole region experiences issues. Additionally, having a large supplier base improves access to additional resources, technology, and expertise. You can stay miles ahead of the curve and spur innovation using these elements.
4. Choose Reliable Supply Chain Solutions
Using suitable technology is one of the most crucial supply chain risk mitigation techniques. A quick Google search yields a plethora of technological solutions that promise to strengthen your supply chain.
These include sophisticated platforms that can optimize the entire process as well as simple tracking tools. However, how might supply chain risks be mitigated by technology?
It all comes down to “visibility.”
You can manage risks more effectively with a detailed picture of your whole supply chain. You can lessen their overall effect by identifying and addressing interruptions as they occur. Additionally, technology can alert you to potential dangers before they materialize.
5. Establish Robust Compliance and Contract Procedures
Nothing makes a CFO happier than formal contracts and compliance protocols. Both of these are essential components of a sound risk management plan, even though they might not be as flashy as high-tech solutions.
Compliance processes, on the other hand, guarantee that all parties in your supply chain are acting reasonably. They can assist with quality control, ethical sourcing, regulatory compliance, and more.
Conclusion
So there you have it: five simple but potent ways to beef up your strategy for risk management in your supply chain. Never disregard the effectiveness of a robust compliance program.
