7 Strategies to Reduce Supply Chain Risk
Supply chain risks can have some truly disastrous consequences if they aren’t mitigated as soon as possible. Health and safety hazards, data breaches, criminal activity, issues with suppliers and even natural disasters can disrupt your supply chain.
Risks of all kinds can threaten your business’s financial health, professional standing and the welfare of the people and businesses involved in your production flow. If final products or services are affected by risks being realised, you’re also likely to face a hoard of unhappy customers, and your sales and reputation might take a hit.
So if you’re going to protect your business’s reputation and revenue effectively, supply chain risk management is essential. In the words of Deloitte, “a supply chain is only as strong as your weakest link.” So each stage of your production flow needs to be assessed for risks and control measures should be put in place to prevent supply chain disruptions or weaknesses.
We’ve put together seven key strategies that will help you reduce supply chain risk and protect your business from any disruptions to the production flow.
1: Diversify Your Supplier Base
You’re probably familiar with the saying “don’t put all of your eggs in one basket”. This saying is worth bearing in mind when managing supply chain risks. Using a single supplier means supply chain risks are more concentrated, and any issues with your supplier are likely to disrupt your entire supply chain.
By diversifying your supplier base, you can spread risks and reduce risk impact. Engaging multiple suppliers, and if possible, suppliers in different locations can help you reduce the risk of localised issues impacting your supply chain.
Working with different suppliers also allows you to select suppliers and contractors with specialised expertise and find goods and services of the highest quality and best price, helping you ensure your products or services are profitable and of good quality.
2: Have Backup Suppliers at the Ready
You never know when one of your suppliers might be unable to fulfil their role in your supply chain. There are a whole number of reasons why your suppliers may be unable to complete an order — they may be facing unprecedented demand, or they might have issues with their own supply chain. They might even decide to cease operations for one reason or another.
As a supply chain manager, it’s your responsibility to make sure that if you face issues with any of your suppliers, you prevent supply chain disruptions and delays by bringing alternative suppliers on board as quickly as possible.
So before any problems occur, make sure you have backup suppliers lined up. Identify suitable suppliers and carry out the same checks you would when choosing a primary supplier. Ideally, after selecting a supplier, you should enter an agreement with them, so they reserve production capacity in case they are needed during a supply chain disruption. Alternatively, you can simply let suppliers know you will keep them on file in case of emergencies, but you face the risk of them having limited availability.
3: Prepare for the Worst with Risk Management Plans
Just as in all areas of risk management, risk assessments are hugely important in supply chain risk management. You need to identify and assess current and potential risks that could disrupt your supply chain and ultimately, prepare for the worst. Outline control measures that should be taken to limit risks throughout your production flow and prepare responses to foreseeable events and risks that could negatively impact your supply chain.
You should build flexibility into your business processes so they can be adapted if need be to minimise supply chain disruptions. It’s also worth noting that it’s not possible to plan and prepare for every possible scenario. So your supply chain risk management strategy should prioritise by probability and impact, and implement control measures and contingency plans for situations that are most likely or would have the biggest impact on your business.
4: Aim for End-To-End Supply Chain Visibility
Your supply chain probably involves many different operational stages, and each stage faces its own risks and challenges. If something were to go wrong in one of these stages, the last thing you want is to only find out about issues later down the production line, or even worse at the last minute before the final product or service is delivered to the buyer.
The sooner you’re aware of any issues, the sooner you can deal with them and prevent them from disrupting or delaying the supply chain, or affecting the quality of final products or services. So supply chain visibility is hugely important when it comes to mitigating risks.
Supply chain visibility is about knowing where inventory is on its journey through your supply chain, and if any issues are going to affect the delivery timeline. This information might be exclusively available for supply chain management to see, or customers may be able to see this information too. With this visibility, you can track the progress of orders and ensure quick responses to any issues.
Another form of visibility that can help you reduce supply chain risks is visibility into the financial stability of your suppliers. Acquiring financial reports during the procurement process can help you choose financially stable suppliers, reducing the risk of corruption, bribery, and financial issues affecting production processes.
5: Share Responsibility by Including Partners in Risk Planning
When planning how to mitigate supply chain risks, it’s a good idea to include suppliers and partners in the process. They may have unique insights into the risks your supply chain faces and can help create effective solutions. You will also need to ensure your suppliers’ risk management and business continuity strategies align with yours.
By including partners throughout the risk management process, you can make sure you’re all on the same page, aware of the risks that need to be managed, and the control measures that should be implemented.
6: Review Supply Chain Risks Periodically
Your risk management strategies will only be effective if they’re up to date and relevant to your supply chain and business operations. So carrying out a risk assessment once simply won’t cut it. You need to regularly review supply chain risks and ensure control measures and planned responses to different scenarios are still relevant.
You should review your supply chain risks at least once a year or whenever changes are made to your supply chain and production processes. For example, if you start working with a new supplier, or changes are made to the manufacturing or delivery processes, you’ll need to assess any new hazards.
7: Make Use of Supply Chain Risk Management Services
Mitigating supply chain risks is a big task, but you don’t have to tackle it alone. There are plenty of <!– supply chain risk management services –> supply chain risk management services that can help you streamline the process.
Accreditation programmes, such as the CHAS Common Assessment Standard, can help you mitigate risks throughout your supply chain and comply with risk management standards and regulations. As a CHAS contractor, you can become accredited through the Common Assessment standard to demonstrate your compliance to clients. Or as a CHAS client, you can easily find accredited contractors who have demonstrated their compliance in risk management.
We have a range of supply chain risk management services that are completely free to CHAS Clients and will give you real-time updates and alerts on the compliance status of your supply chain partners. All you need to do is sign up for a CHAS Client account. Alternatively, you can become a CHAS contractor and gain access to industry-leading accreditation schemes and risk management resources, including training modules, risk assessment templates, business shield support and more.