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Helping Companies Withstand the Turbulence of Tomorrow
Today's turbulent economic state has posed a significant threat to countless businesses worldwide - whether in terms of staffing and internal operations, product demand, or continuity of supply. But the poor economy isn't the only contributor to the sharp decline in business and disruption to supply chains. A scarcity of resources, unpredictable product demands, tightening international regulations, rising fuel costs and political events are all culprits.
So what are the key sources of risk for business supply with regards to these contributors, and what practical steps can businesses take to prevent, slow, or reverse supply chain disruption? Key sources of risk don't always have to entail large-scale, uncontrollable disasters. In reality, the most common threats to supply chain management (SCM) has more to do with controllable, often predictable matters - even if an initial mishap is completely out of a company's control. For example, if a natural disaster hits an area where a company is stationed, that company is likely to experience some serious impact. However, by identifying and preparing for setbacks of particular threat to a business, that company can get through the disaster with minimal damage - even if the natural disaster was on a large scale.
If the company in question would suffer most from routing of supply, they can plan for such a risk in case any circumstances threaten. The key is to carefully assess risks to a given business, and plan for damage control based on those risks. And while not all risks are predictable, some certainly are. A company will have to keep a close account of events having a long term impact on them; ultimately facilitating the prediction and control of risks.
Once the key sources of risk have been identified, it's important for executives to assess their impact and build supply chains that can accordingly withstand the turbulence. Subsequently, it's vital that all employees of a given company weave risk mitigation into their daily activities, rather than the company regarding risk management as a one-off movement. Moreover, supply chain modeling and scenario analysis should be implemented to quantify alternative plans and their impact and cost to a business.
There are a number of technological tools and SCM software that are designed to - or which can help - assess the impact of risk on a business supply chain, as well as to evaluate alternate strategies to help executives make final assessments of the gravity of pre-emptive strikes.
Throughout the process, it's also vital to remember the importance of supply chain agility. In fact, many experts argue that agility should be valued over efficiency, as events move quickly and can turn supply on and off with little or no warning. Efficiency in supply chains, however, is often built on predictability, repeatability, and a solid supply chain network - which is, increasingly, found to be lacking in the actual functionality of businesses. Responsiveness should also be improved so that the impact of unplanned events can be minimised as much as possible.
Finally, a framework for continual and formal assessment of supply chain risk should be developed. Because risk varies from industry to industry, there is no single way to predict or deal with it. So, a qualitative and quantitative method of risk identification and management is necessary.
About the Author Paul McIndoe writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.
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