Despite the long-standing need of making the supply chain more resilient, the global emergency of Covid-19 took the task to a new level. By the beginning of 2020, 75% of businesses experienced a global supply chain disruption along with the increased demand for goods & services by nearly 40% by the end of 2020. Most of these disruptions are caused by unpredictable factors such as natural disasters, technology failures, and geopolitical stress, etc. These issues have had their crucial imprints on global economies, encouraging legal authorities and organizations across all industries to work together on solutions.
Supply chain risks hold vital importance in running a business involved in global trade & transactions. From purchasing raw materials to distribution of finished goods & services to the end-user, it has its significant contribution to run a business’s operations smoothly & uninterruptedly. If they are not managed on time, it can have tremendous consequences. Health and safety threats, data breaches, natural calamities, fraudulent activities, and even conflicts with suppliers can disrupt your supply chain. All these risks can affect your business’s financial health, professional capability, and many more. If your final goods or services are being affected by these risks, you are prone to experience unsatisfied customers and disrupted sales & reputation. So, to run your business efficiently and survive in the competition, supply chain risk management is essential.
Recommended Read: International Trade Industry Hit By Supply Chain Disruptions
In this blog, we have explained some of the key strategies to manage & reduce supply chain risks and protect your business from upcoming disruptions. Let’s have a look:
First of all, you need to stop putting “All your eggs in one basket” ie. Avoid relying only on a single supplier to cater to your entire international trade transaction needs. Any issues with the supplier will limit the opportunities for your business and will have a disrupting effect on your overall supply chain. Instead, diversify your supplier base so that you can distribute risks to have minimum impact. Try to involve multiple suppliers, and if possible, ensure them in multiple locations to decrease localized risks affecting your supply chain.
Another important step towards supply chain risk management is decentralizing the manufacturing process for business products. Many businesses often prefer centralized manufacturing due to ensuring organized stock turn rates, production schedule & financial benefits, as well as it costs 10% less than its decentralized counterpart. Plus, it also ensures easy forecasting, streamlined production, and optimal use of limited resources making it an efficient choice. Despite its several benefits, it also has some serious drawbacks in terms of supply chain disruptions. For example, inflexibility to ensure efficient workarounds when any unforeseen event occurs. Decentralized manufacturing, on the other hand, is flexible, as well as boosts a trustworthy relationship between manufacturers and customers, resulting in more relevant data on the company’s hands to facilitate service better.
As mentioned above, putting all your efforts only on a single supplier has multiple side effects and the supplier's unexpected inability to perform any pre-described supply chain task is one of them. Regardless of the reasons why your supplier may be unable to execute an essential task, it ultimately puts your business reputation at stake & acts as a threat to your current & future trade opportunities. So, what is the solution? Being a supply chain manager, it is necessary to bring alternative suppliers on board as a backup plan to avoid supply chain disruptions in case of any emergency. Find suitable suppliers and enter an agreement with them by carrying out crucial checks on them.
Risk assessment is essentially important in supply chain risk management to avoid risks. You need to identify and evaluate existing & potential risks that are capable of disrupting your supply chain. Not all risks require mitigation efforts. So, being a supply chain leader, you need to know which risks are impending and which are probable. So that you could outline the controlling measures to limit the risks throughout the production flow and prepare for the worst unforeseen events & risks that could negatively affect your supply chain.
With the insane growth of big data and sharing of information, supply chains are exposed to various cyber threats as a vast amount of information is shared throughout the supply chain. Many businesses rely on the Internet of Things and other digital technologies to run their supply chain operations. It makes them more prone to witness cybersecurity threats such as malware, ransomware, phishing, and hacking, etc. To strengthen your cybersecurity measures, the business leaders should implement:
1. Compliance standards for all third-party vendors including manufacturers, suppliers, and distributors.
2. Conduct a deep vendor risk assessment before signing any contract.
3. Train all employees about cybersecurity protocols
4. Apply a software solution that gives complete visibility into the supply chain operations
5. Work with familiar vendors in the supply chain network
6. Implement backup measures to protect data backups.
7. Update organization’s anti-virus, anti-spyware, and firewall software solutions, and apply more advanced cybersecurity measures.
Apart from all these preventive measures, the supply chain leaders can also make use of supply chain risk management services to streamline the process. They can tackle the risk for you throughout the supply chain and comply with risk management standards and regulations. Risks will continue to occur in the supply chain, but an appropriate & successful supply chain risk management combined with the right mitigation protocols, and technology can help you overcome the upcoming threats.