What would you do if your supply chain went down? Can your small business handle the disruption? The answer is probably no. Even a temporary disruption can have long-lasting consequences that can affect every aspect of your organization.
Whether you’re working with a global supply chain or a localized one, interruptions can happen. So, what can you do to minimize your risk? Creating strategies for managing supply chain risks is the most effective solution.
Why You Want To Manage Supply Chain Risks
If you’re not sure why managing your supply chain risks is important, it’s going to be difficult to create effective strategies. Optimizing your supply chain helps to streamline operations which in turn boosts efficiency, lowers costs, and mitigates risks.
The process starts by determining what could go wrong. For example, if winters tend to be especially harsh, icy roads and freezing temperatures can slow things down or even grind your supply chain to a halt. The goal of your risk assessment is to figure out the potential scenarios and come up with effective solutions.
Your risk management strategies will also make it easier for you to make impactful decisions in real-time if a disruption occurs. The goal of your strategies is to minimize any risk to your business.
Effective Strategies for Managing Risks to Your Supply Chain
When you have an effective risk management framework, the impact of a supply chain disruption can be significantly reduced.
Work with Multiple Suppliers
Businesses got a wake-up call in 2020 during the global pandemic. Everyone may have been sheltering at home for a few weeks or even months but vital businesses were still open. Unfortunately, even though some businesses were operating as usual, their supply chains were in chaos.
Everything from commercial trucks and trains to cargo ships was delayed or simply didn’t have the personnel to operate the vehicles. Organizations quickly realized their supply chain risk management strategies were woefully inadequate.
The pandemic reinforced the importance of working with multiple suppliers. It’s ultimately easier to manage a single supplier and may even be more cost-effective, at least when everything is going great. You may even become friends with your supplier. You know, meet up for the occasional drink after work. However, regardless of how close you become with your primary supplier, it’s always a good idea to use other sources.
You can still maintain a great relationship with your original supplier, only now you have additional resources. Even though the initial cost may be more, not having to shut down operations because of a glitch in your supply system can easily give you a return on your investment.
A good tip is to work with suppliers in different locations, so, this way, if one supplier is snowed in, others can still get to your facility.
Create Inventory Buffers
Your business may follow the rule that everything sells before restocking, which is an effective way of managing inventory. You can keep costs down and don’t need to worry about expiration dates on items.
Your bottom line even looks great and this always makes stakeholders happy. The only downside is the potential risk. What happens if your supply chain goes down right before your company’s big sale? Are you going to have enough stock for all of the expected customers?
Creating an inventory buffer may go against a company policy, but sometimes, you need to update organizational protocols. Even though reducing inventory can lower warehousing costs, it can also have a steep price.
A good rule to follow is to always keep enough inventory on hand to meet consumer demand. The demand may not occur for a couple of months, but at least you’re prepared. Remember, your goal is to provide an exceptional customer experience and it’s hard to do when you’re out-of-stock due to a breakdown in your supply chain.
Get to Know Your Vendors
Okay, we mentioned you can become good friends with your third-party vendors inside and outside of work. There’s nothing wrong with this and it may even help strengthen your business relationship.
Don’t expect any favors, you know being bumped up to the top of a delivery list, but a good working relationship has other benefits. You develop a level of trust with your vendors, knowing your inventory is always precisely what you ordered.
Take Advantage of Software Solutions
Taking advantage of software solutions like the cloud can improve visibility into your supply chain risk management strategies. You can reduce inefficiencies and more easily share data with other stakeholders. Cloud-based software also makes it easier for businesses to spot any irregularities in their supply chain.
Being able to identify any irregularities before they become problems is an effective way of managing and reducing your risks.
Don’t Stop Performing Assessments on Your Supply Chain Risks
Simply because you’ve created effective supply chain risk management strategies doesn’t mean your job is done. While congratulations are in order, you’ve completed the tough part of the process, you’re not done.
Supply chain risks can change daily and there’s a good chance you haven’t covered every possible scenario. Performing regular assessments is an effective way of identifying and minimizing these risks.
