Understanding Supply Chain Risk Management and How it Can Help Your Business
Friday, December 27, 2019, 6:00 AM | Leave Comment
Businesses everywhere worry that there won’t be the opportunity available to make immediate changes after identifying risk or possible disaster.
Supply chain risk management is part of the process of predicting risk and making those necessary changes to avoid it.
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What is Supply Chain Risk Management
Your supply chain is everything from your orders for raw materials out through until the finished product hits a store’s shelves. Most companies don’t have to worry about everything from raw materials to final shipping, but it’s likely that your specific supply chain will come with the same amount of risk and concern.
Risk management, specifically for your supply chain, is the act of planning and taking strategic steps to find, analyze, and avoid or reduce the risk in an end-to-end supply chain.
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How Does It Work?
Initially, supply chain risk management just seems like a lot of worries. You worry about every possible step, but the ultimate payoff should be less money lost in the supply chain, better time management, and fewer defects.
Supply chain risk management isn’t limited to Six Sigma or LEAN type thinking either. You can work with an independent supply chain risk analysis provider and then take over on mitigating the risk yourself.
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Where to Begin
When you are first starting to implement supply chain risk management, you’ll want to divide your risks into “known” and “unknown” risks. While your company may face day to day struggles such as materials not coming in on time, unreliable drivers, or high-defect rates during production, these are all known risks.
The good note is that known risks are the easiest to control. You can often change providers, work with providers, or transit companies to get better service and control your internal staff or processes to avoid risk.
Unknown risks, however, are often impossible to predict. Where known risks are frequent weather patterns, unknown risks are the off-season hurricanes that roll into unsuspecting towns over the course of a day.
Unknown risks will often fall to management and executives to ask “what if” questions until a risk possibility is identified. One example of an unknown risk is a lawsuit. It’s likely to happen, but no one knows when. Numerous companies have full legal teams just waiting to take to the defense.
Another unknown risk example is cybersecurity. These examples open up the thought process for identifying possible unknown risks. Then you can work with your internal processes to mitigate that risk and reduce the damage before the storm hits.
