Analyst Insight: In today’s volatile market, companies must proactively identify, assess and mitigate supply chain risks to ensure continuity of operations, reduce costs and keep customers happy. Shippers are getting more concerned about meeting customer service requirements as more carriers go out of business. Implementing robust supply chain risk management strategies, and investing in resilience can help companies navigate the challenges of an increasingly uncertain and complex business environment.
Supply chain risk management is crucial for shippers in today’s volatile market, which is caused by the increased complexities of a global marketplace, natural disasters, suppliers/carriers going out of business, cyber-security threats, and geopolitical issues. With evolving regulations and economic volatility, shippers must be prepared for anything that can happen within their supply chains — from suppliers to end customers.
The most important thing to remember is that a risk management program is ongoing — it never ends. It requires a proactive approach to identifying, assessing and mitigating risks to ensure the continuity and resilience of the business. Risk management programs must be regularly reviewed and updated as risks and circumstances evolve.
To start a risk management program, senior management must give their buy-in and commitment to its success. Next, a dedicated, cross-functional team from operations across the company must be selected. This team is responsible for the development and implementation of the program, along with setting goals and objectives.
Next, risks need to be identified: Are suppliers financially stable? Are you utilizing the most economic mode of transportation in your supply chain? Are your distribution channels secure? Have you had any quality issues? Are your demand forecasts inaccurate? Do you suffer from stockouts/inventory control/accuracy issues?
Once the potential risks have been identified, the probability of the risk occurring and the potential impact on your supply chain need to be assessed. Do any of these risks have a single point of failure? Inventory strategies must be created to buffer against disruptions. Use historical data and market trends to improve forecasting. Stay up to date on regulations and compliance requirements. Ensure that your systems and data are secure against cyber threats.
Technology can be used to conduct risk scenarios to assess how the supply chain will respond to each risk. Choose specific scenarios based on the identified risks that are relevant to your business. For example, if you are concerned about supply chain disruptions, create scenarios for supplier bankruptcies, transportation breakdowns, or labor strikes.
Create detailed narratives for each scenario, describing the event, its consequences, and how it might affect various aspects of the organization, such as operations, finances, reputation, and customer relationships. Next, assess the potential impact of each scenario on the organization, such as evaluating financial, operational and strategic implications. Then, determine what actions need to be taken, who is responsible for these actions, and the time-frame for response. Develop contingency plans for each scenario, outlining specific steps to respond to the event. Contingency plans should cover short-term and long-term actions. Document all aspects of the scenario planning process, including the identified risks, scenarios, impact assessments, response plans and any revisions made over time.
Outlook: Supply chains will always be vulnerable to risks, whether from partners, customers, competitors, or the environment and economic situations. To thrive in this environment, shippers need to be prepared to continually assess risks to their supply chains, and create concrete strategies to mitigate and overcome these risks. Risk management tools help shippers proactively address vulnerabilities and make informed decisions to protect their supply chain and ensure business continuity.
Courtesy : https://www.supplychainbrain.com/articles/38776-why-do-companies-need-risk-management-in-todays-volatile-marketplace
