How to reduce risk within your global supply chain
In today’s competitive global marketplace, the supply chain network is becoming increasingly complex with customers expecting more and having more choices, faster fulfillment of orders, and lower prices. To continue to thrive, wholesalers need to both increase efficiency and eliminate waste. The goal of any wholesale business should be to create a secure and high-performing supply chain. In fact, the way a company successfully mitigates supply chain risk and avoids the potential costs of supply chain disruption, is fundamental to sustained growth and prosperity.
The following list details “5 ways to mitigate Supply Chain Risk,” (as written by pay4.com)
1. Undertake a business impact analysis: A thorough business impact analysis of your supply chain risk will help you understand your potential exposure to risk and will address the impact any disruptions could have on your business. Start by identifying your key business processes, and the resources and activities you need to run your business. Then assess how these key elements will be affected by supply chain disruptions. Next, quantify and prioritize the risks, so you can focus on which would impact your bottom line the most. From there, you can create a plan proactively, which will enable you to respond swiftly and effectively to manage the impact of any disruptions.
2. Assess and monitor new and existing suppliers: When partnering with new suppliers, be sure to assess them again the following factors:
- Capabilities measured against your needs
- Opinions/experience of their other customers
- Resources, including staff, equipment, storage and materials
- Commitment to quality standards
- Management and control over policies, processes, procedures and supply chain
- Financial health-do they have a healthy cash flow?
- Cyber security processes and policies
- Approach to communication and collaboration
Thoroughly assessing new suppliers will not only help to reduce your supply chain risk but will also place you in the best position to work with your suppliers to improve service levels.
To further mitigate supply chain risk, be sure to weave security elements into all of your supplier agreements. Proactive elements such as an incident response plan and data security policy can help to both preclude and minimize the effects of supply chain disruption.
You should also keep a close eye on your existing key suppliers, and regularly review their standing in relation to supply chain risk. Understand their risk factors-financial standing, regulatory compliance, and risk management strategies.
3. Reduce concentration of supply: To further reduce your risk of disruption, try to reduce your dependence on single supply lines. Obviously, if you’re dealing with a nice product, or have secured a significant bulk discount, then you have to weigh the benefits with the risks. However, relying too much upon a constant and uninterrupted supply from a single vendor, country or region can create a single point of failure. Try to identify and build relationships with alternative primary and secondary suppliers. Understand which suppliers would represent the best alternative sources should a problem with your preferred suppliers occur.
4. Work with your suppliers: Develop a collaboration platform and communications framework to assist with the exchange of information with your suppliers. This will not only mitigate supply chain risk but will also help to cut costs, reduce errors and facilitate collaboration on matters such as logistics and security. Make sure all of your suppliers are aware of your forecasts and customer demand cycles, so that when a fluctuation occurs they’ll be prepared and able to deal with it easily. Incorporate agility into your cash flow management. With working capital available to smooth out demand, you’re less likely to experience disruptions in supply during spikes of increased demand. Pay your suppliers promptly. A supply chain with a healthy flow of working capital is far less likely to run into internal problems. Using appropriate working capital finance to improve the flow of cash throughout all stages of your supply chain ensures it is in the best possible position to be robust, secure and present a minimal risk to your business.
5. Proactively address supply chain cyber threats:
Information and security is often shared throughout a supply chain. This means that the cyber security of anyone business within the chain is potentially only as strong as that of the weakest member. Cyber attackers identify the organization with the weakest cyber security within the supply chain and use the vulnerabilities in their systems to gain access to other members.
In order for your supply chain to be secure, all parties throughout must carry out effective, coordinated security measures.
- You must address your own cyber security procedures and policies. This involves educating and checking your people, improving processes, and upgrading technology if necessary.
- You need to place cyber security at the heart of your supply chain management. Review contracts, and ensure that all your suppliers have codified policies and robust internal IT security procedures in place.Establish a multi-party supply chain risk assessment process that engages as many members of the supply chain as possible. Maintaining common standards and improving your supplier relationships will help you to more easily anticipate, identify, communicate, and ultimately mitigate the cyber security risk arising from related dependencies and vulnerabilities.
- You need to make sure your business is both knowledgeable and involved in your supplier’s disaster recovery plan. When it comes to cyber security, you and your suppliers need to have a response plan put in place before a breach occurs.
- Invest in Cyber Insurance for your business. McSweeney & Ricci can help you identify ways to reduce your risk of cyber attack and can provide you with a detailed data breach insurance policy that will help your business recover in the event of a breach.
In conclusion, failure to predict and reduce the risk of supply chain failure can affect your product availability, revenue generation and even cause complete production halts. Success in mitigating supply chain risk includes creating a culture of compliance that allows anyone, at any level of the organization, to potentially stop a shipment from occurring if non-compliance is suspected to have occurred or is about to occur. Wholesalers need to b proactive and plan for supply chain disruptions in advance in order to deal with them in the best way possible. Partnering with an experienced insurance agent, such as McSweeney & Ricci, can help your organization identify and mitigate risk and can help further the growth of your business.