Supply Chain Risk Management: Analysis & Assessment

7 Key Supply Chain Risks

There are many types of supply chain risks that businesses can encounter when operating their supply chains. These can include things like theft, damage, and disruptions from natural disasters or other events. By taking steps to mitigate these risks, businesses can minimize the impact on their operations. In addition to identifying and mitigating risks, risk management in supply chain management also includes monitoring KPIs to track progress over time. By doing so, businesses can ensure that they are making the right investments and improvements to their operations. Before going forward, if you want to understand more about supply chain management, refer to the lecture What is Supply Chain Management (SCM) and How It Works?

Below are the 7 key supply chain risks:

1. National or Local Regulations

As you can imagine, this type of supply chain risk is not under your control. Despite that, it can influence you quite a bit, which is exactly why you need to consult the regulations very often. The last thing you want to do regarding supply chain risk management is to go over some laws. So, try to keep that in mind as it’s very important and it can make a whole lot of a difference.

2. Raw Material Prices and Labor Concerns

Every supply chain focuses on a certain raw material price. If that price goes up, you can face some major issues. When you do supply chain risk management you have to focus on raw materials. Labor problems as a supply chain risk management factor can appear at all times for any supplier, so it’s crucial to deal with them to the best of your capabilities as fast as possible. It will not be easy to do that right from the start, but with the right approach, you will see that nothing is impossible. However, in such situations, strategic supply chain management is helpful to minimize risks.

3. General Economic Conditions

Economic problems will affect a country’s stability and thus supply chains will be affected. This is one of the supply risks you have to tackle early on if you want to reach the very best success and results.

4. Security Breaches

Security problems like hacks and privacy concerns, theft, or computer crime are quite common. These can also affect the supply chain. This is why you have to focus on doing supply chain risk management if you want to get the very best results and the utmost experience.

5. Currency Problems

Currency problems can also be seen as a supply chain risk management factor, especially since they tend to appear very often when a certain currency is fluctuating. Unfortunately, this is one of the risks that you have no control over.

6. A Lower Demand of Products

If the demand is low, you will see that the supply chain will also be affected by this type of problem as well. It’s a very good idea to focus on studying the market at all times to avoid any potential losses at all times.

7. Business Interruption

Many factors can cause business interruptions, starting with terrorist attacks, war, conflicts, and natural disasters among many others. Most of the time these issues can’t be controlled or dealt with, so a proper way to eliminate the problem has to be found by each company.

7 Key Supply Chain Risk Management Strategies

Supply Chain Risk Management (SCRM) is critical for maintaining the resilience and efficiency of supply chains. Here are some key strategies for effective supply chain risk management:

1. Risk Identification and Assessment

Identifying potential risks and assessing their impact and likelihood is the foundational step. This involves mapping the entire supply chain to identify vulnerabilities and critical dependencies.

2. Diversification of Suppliers

Relying on a single supplier can be risky. By diversifying and sourcing from multiple suppliers, businesses can mitigate risks associated with supplier failure or disruptions.

3. Inventory Buffering

Maintaining buffer inventory or safety stock can protect against supply chain disruptions by providing a cushion that allows operations to continue smoothly in the face of delays or shortages.

4. Supplier Relationship Management

Building strong relationships with suppliers can lead to better communication and collaboration. This fosters more timely and effective responses to potential disruptions.

5. Use of Technology and Data Analytics

Leveraging advanced technologies such as IoT, AI, and data analytics can provide real-time visibility into the supply chain, allowing for quicker identification of issues and proactive risk management.

6. Regular Audits and Compliance Checks

Conducting regular audits and ensuring compliance with industry standards and regulations can help in early detection of risks and maintaining overall supply chain integrity.

7. Business Continuity Planning

Developing comprehensive business continuity plans, which include action plans for various disruption scenarios, ensures that companies are prepared to respond swiftly and effectively to any disruptions.

Supply Chain Risk Analysis

The supply chain risk analysis is a process of analyzing and evaluating the potential risks that are associated with the supply chain. The goal of the supply chain risk analysis is to identify any potential risks that may arise in the supply chain and to mitigate or eliminate these risks as much as possible.

1. Identify Sources of Risk

One of the most important aspects of the supply chain risk analysis is identifying the sources of risk. This includes identifying any potential problems that could arise in the source and evaluating how likely they are to happen.

Example

If there is a shortage of raw materials, it would be important to identify why this might be happening and what actions could be taken to mitigate this risk.

2. Understand How Supply Chain Works?

Another important aspect of the supply chain risk analysis is understanding how each part of the supply chain works together. This includes understanding how each supplier performs and how their performance can affect other parts of the supply chain.

Example

If one supplier has a problem with quality control, it could lead to delays for other suppliers that rely on them for supplies.
Finally, it is important to understand how the supply chain affects other areas such as operations and marketing. By understanding how these areas work together, it will be easier to predict how changes in one area will affect these areas.

This lecture is a part of supply chain management courses and MBA supply chain management online programs, which are offered by AIMS through a self-paced interactive learning system!

Supply Chain Risk Assessment

Supply chain risk assessment is a process that involves analyzing the risks and impacts of a supply chain to improve the efficiency and effectiveness of the operation. By identifying the potential threats, you can take steps to mitigate those risks and reduce your overall costs.

There are two main types of supply chain risk:

• Operational Risk, and,
• Financial Risk.

1. Operational Risk

It refers to the risks associated with your day-to-day operations, including theft, product damage, and inventory issues.

2. Financial Risk

It refers to the risks associated with your finances, such as money owed to suppliers or unpaid taxes.

Conslusion: