How to manage risk to ensure 100% supply chain security
In the volatile world of supply chains, risk manifests itself in many ways. There are several types of risks in the supply chain, including natural phenomenon such as weather, security risks such as thefts, operational risks such as cargo damage, financial risks such as bankruptcy, and cyber risks such as data breaches and hacking. These risks have the capacity to disrupt even the most robust supply chains, so how can you protect yourself against them and ensure your supply chain’s wellbeing?
As per BCI, the number of supply chain disruptions that organizations encountered in 2020 was higher than any other year, with 27.8% reporting more than 20 supply chain disruptions during 2020, up from just 4.8% reporting the same number in 2019. 89% of companies surveyed by Gartner said that they experienced a risk event in the past 5 years. As with any risk, there are also options in supply chain management to mitigate and manage these risks.
5 risk management values
Central to this mitigation and risk management plan is running a supply chain that embodies five core values;
- Real-time visibility
These traits allow supply chains to respond to sudden changes in the market and adapt to changes in market sentiments, structures, and strategies.
- A resilient supply chain is one that is able to return to its original form or evolve to a better, more desirable form after undergoing disruptions. Resilient supply chains are flexible, reliable, and adaptable- having the capability to adjust to new demands and change as required by the market.
Companies can develop resilience by increasing redundancy, building flexibility, and creating a positive, forward thinking corporate culture.
- Agility in supply chains is critical, especially when facing the rapid fluctuations in both demand and supply. Many companies have had to change their strategies and create agility in their supply chains in light of the COVID-19 pandemic – switching between near-shoring, opting for air freight over sea freight for speed, and chartering ships and containers.
- Adaptability in supply chain management is vital in responding to fluctuating market patterns and trends. Tracking economic changes and exploring the needs of the end-user, who may not be the direct customer, is crucial to achieve adaptability.
- Alignment of supply chain strategy is of critical importance and this alignment must happen not just internally but externally with vendors, suppliers, and other stakeholders in the supply chain.
When everyone in the supply chain is aligned, the company is able to optimize its supply chain performance, maximize revenues, and achieve a competitive advantage.
- Real-time visibility provides the data required by supply chain managers to monitor and track market trends, as well as the movement of their respective supply chains. By tracking these changes globally, supply chain managers can make their supply chains adaptable and agile. For example, the creation of alternate supplier networks which may result in quicker lead times and cost-effectiveness apart from providing alternate sources. Real-time supply chain visibility aids in obtaining a better understanding of the performance in various parts of the supply chain, and can provide alerts on issues that could turn into problems.
Managing risk in your supply chain today
Implementing day-to-day habits with risk management in mind can help mitigate these ever-evolving challenges before they become too big to handle. For example, conducting regular supply chain audits in order to identify risks in exposure, supplier quality and OTIF patterns are a great, manageable task any company can adopt with ease.
Setting up SOPs covering best practices that can be incorporated into supply chain operations/management is another habit to consider. A key element to keep in mind is having everyone in the chain on the same page. You could do this by carrying out regular supplier performance audits and creating a contingency/ business continuity plan aligned with that of the suppliers to ensure prompt delivery, financial integrity, compliance, risk profiles and sustainability.
In addition to regular audits, stress tests on the supply chain can assist in checking for any hidden vulnerabilities as well.
Considering cyber risks are steadily increasing, assessing cyber security risk and its management through effective use of compliance standards, training, use of new-age digital supply chain platforms are key in modern supply chains.
Risk awareness training for staff is also a key area for supply chain risk management and mitigation. The training should typically cover the various categories of risk that the company and its supply chain can potentially face so everyone is as prepared as possible.
Mitigating tomorrows risk
Modern supply chains face a high level for disruptions, especially relating to unprecedented ones like COVID-19 - which is still with us with no immediate end in sight.
Mitigation of supply chain risks needs to be achieved through supply chain resilience and agility. While enhancing resilience, agility, adaptability and increasing competitiveness are some of the important factors in supply chain risk management, supply chains in the 2020s have been forced to be prepared for unprecedented, fast-developing disruptions. While supply chain managers may not be able to control the various risk events that the business generates, they can control the size of the target through a strategic approach to risk management.
Aside from a digital transformation and organizational transformation, there must be a strong collaboration between the various heads who look after supply chain and risk managers along with the usage of innovative technology solutions and advanced analytics in order to effectively manage risks in supply chain.