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“Managing the Supply Chain” – Supplier Risk Management Basics

A company, while handling its operations pays close heed to the suppliers; those are no less than fuel to a vehicle, enabling manufacturers, retailers, and organizations to achieve business objectives viably.

supply chain management

Whether inside or outside, risk has always been a part of the four walls of a company contributing sheerly in the supply chain management.

Nevertheless, risks if ideally managed, nothing can occur that may put a negative impact on operations or profitability to a firm that has seen its share price falling or maybe its value getting eroded.

What Is A Risk?

Simply put, its a probability of occurring events that can/will bring challenges along, putting a negative impact on the operations team.

To a surprise, not every organization is aware of the aftereffects that risks may provide.

How Can Risks Be Managed?

Handling a risk is to identify the loopholes well in advance in relation to your vendors or suppliers and having formed an actionable plan for the same to deal with the tough situations, effectively.

Some robust plans are necessary to deal with company’s disruption and the financial losses to reduce their probability of occurrence.

Take a look, what APICS say about a Supply Chain which forms a powerful base for Supplier Risk Management:

  • Should create the best value
  • Leverage universal logistics
  • Contribute to an organization’s competitive behavior
  • Equalize the balance of supply with demand
  • Measure the throughput of a supply chain

Be it managing a supplier’s risk or any other business operation, the strategic plan must be dedicated to end-to-end performance improvement through collaboration with its network of suppliers and customers.

Now let me give you an inner view of the plan that every establishment must indulge in its Supplier Quality Management workflow.

A Necessary Plan Adhering To Supply Chain Risk Management(SCRM)

The complexity of global outsourced supply chains combined with some optimization techniques, to improve efficiency, has increased supply chain vulnerabilities to a great extent.

Unknowingly, they also expose the company to the risk of a supplier suddenly going bankrupt, closing his operations, data breach or being acquired.

Looking at all these, there arises the need for these following three crucial steps to be involved and implemented thoroughly in your risk management plan:

1. Identify Risk

Supply chain experts and their adroit team must work closely to identify and list as many potential risks as possible.

There should be no wait, and the task must begin before the product production begins and should be continued after the product starts getting developed.

Examine, whether the risk density high, medium or low?

Certainly, there is a need to define how critical a risk can be. Generally, project and risk managers are involved in analyzing these ideas, thereby, setting grants to individual risks.


2.Quantify Risk

The team after parsing all the critical risks and quantifying them should apply robust methods to evaluate which risks need to be addressed and in how much detail.

But to make a decision on whether to deal the problem or take instant action to prevent or minimize its effect, entirely depends on an organization’s call-to-action.

3. Build Contingencies

This is a vital step where you have to build strategies and develop actionable plans to navigate around a supplier delay or a shipment being held up at customs.

Plan well and organize them as per their prioritization and relevancy, thus, including minor to major details obligatory to act over the created plan.

Also, defining the risk-based procedures and escalating them on internal channels when an adverse event occurs, can be done under this step.

Take a Tip:

[Among the several types of supply-interrupting problems, most severe are those who have a relatively low probability of occurrence but a very high severity of an impact.

While such risks cannot be eliminated, however, their severity can be reduced.]

Having been acknowledged about the steps to involve, take a run down to the SCRM Practices which after implementation, prove to be advantageous in acquiring semantic business results.

7 Major Supply Chain Risk Management Practices To Apply

1. Identify unique supply chain elements to gain visibility

Get to know your suppliers and your enterprise’s supply chain to get clear insights into what’s happening within. Monitor and track high-risk elements which enable you to understand, manage and lower the adverse effect an event.

2. Limit the access and exposure

There are various branches traversing towards your supply chain access by various external/internal sources. Therefore, limit the access to those required to people assigned with specific roles and responsibilities.

3. Organize SCRM awareness and training

Significant attention should be paid on training campaigns within an organization to make the personnel efficient enough to analyze the vulnerabilities of supply chain risks. This will put your supply chain techniques adequately in place.

4. Share information strictly

We know there are significant chances of risks while trading. So why not be conscious prior to facing any losses, whether it’s a content loss or any miscellaneous one. The crucial data should be shared among acquirers, integrators, and suppliers when agreed upon common objectives.

5. Strengthen up your deliveries

The end product delivery is closely linked with the inventory and its maintenance. Delivery is an essential attribute within a supply chain and should be handled by robust mechanisms and tools.

6. Mitigate your risks with insurance

Insurance holds a potential value that needs to be understood by SCRM professionals that can help recoup financial losses as a result of non-welcoming disruptions. Insurance companies specialize in quantifying risk and can help companies to put forward appropriate contingency plans.

7. Plans dealing disastrous scenarios

Losses and damages are part and parcel of a business lifecycle. Multiple unexpected disasters can arise which may ruin global supply chains. So map out your disaster planning document efficiently considering risks associated with the location, climate, geography or even a country’s political state.

Over To You

Managing the supply chain with minimal possibility of risk should be dealt reactively which needs to be paid heed by all the marketers and the competitors in line.

A strategic supplier partnership should be handled smoothly to encounter better results and performance from both the partner and the supplier for a long-lasting relationship.

There are enormous best and practical strategies for mitigating with supply chain risk management, using proficient monitoring systems and technology’s support.

But the regret is that not many businesses and their owners haven’t started to draw the roadmap implementing a proper SCRM solution.

About the author

Sidharth Pk

Sidharth. Professional Blogger. Android dev. Audiophile. Find us on Google+
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About Sidharth

Sidharth is an Android developer, professional blogger & a certified blockchain expert. He started his blogging career with a smartphone. Often sought help from his friends to publish the posts he wrote. Apart from blogging & coding, he loves spending time with his headphones (audiophile) and cameras. Read how he makes money blogging and living a boss-free life. His story.

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