8.4 Supply Chain Risk Management Strategies
There are several strategies to address or prepare for risks associated with supply chain management; however, while following the abovementioned process, organizations can formulate the right or appropriate strategy.
Video: “How Companies Are Overhauling Supply Chains to Ease Bottlenecks | WSJ” by The Wall Street Journal [5:15] is licensed under the Standard YouTube License. Transcript and closed captions available on YouTube.
Following are some of the strategies:
Multisourcing
Consider not relying on a single supplier. Multisourcing offers a robust shield against disruptions. Categorize suppliers not just by cost but also by their potential impact on operations in the event of an issue. This allows for a multifaceted approach to risk mitigation. Explore establishing relationships with additional suppliers in different geographic locations, or consider partnering with suppliers with diversified production facilities.
Nearshoring
Nearshoring involves strategically locating suppliers and distributors closer to your core operations or final product destinations. This approach can significantly reduce cycle times for both product development and delivery. While regional suppliers may come at a slight cost premium, the benefit lies in reduced transportation risks associated with longer distances.
Stress Testing
Mapping the supply chain network is merely the first step. True resilience requires a proactive approach. Regular and comprehensive stress testing is invaluable for identifying vulnerabilities, some of which may be deeply embedded within the supply chain. By simulating various disruption scenarios, companies can proactively develop contingency plans and identify areas for improvement.
Building Buffers
While maintaining buffer inventory and capacity represents an added expense, it can be a strategic investment. New product launches or market expansions present ideal opportunities to create buffer capacity. Furthermore, stockpiling critical products during high-risk periods (e.g., hurricane season) can significantly mitigate risk for businesses operating in regions prone to climate-related disruptions (Marotta, 2024).
Improvements In Cyber Security
While the Internet of Things (IoT) and other technologies optimize operations, they also introduce new cybersecurity vulnerabilities – malware, ransomware, phishing attacks, and hacking. Environmental disruptions can further exacerbate these risks. Some of the strategies are the following:
- Standardize Security: Mandate baseline cybersecurity compliance across all supply chain partners.
- Control Access: Define user roles and permissions to restrict system access.
- Vet Your Vendors: Conduct thorough cybersecurity risk assessments on potential vendors.
- Data Governance: Implement clear data ownership and usage protocols.
- Workforce training: Train employees to identify and report suspicious cyber activity.
- Visibility: Real-time monitoring and anomaly detection across the supply chain.
- Unified Recovery: Collaborate with partners to develop a unified disaster recovery plan.
- Backup and Secure: Establish robust data backups and maintain updated security software; explore advanced measures for enhanced protection (Canadian Centre for Cyber Security, n.d.).
Selecting a Reliable Freight Carrier
Partnering with dependable freight carriers is crucial for any organization within a supply chain. On-time deliveries are essential for manufacturers to build customer trust and for retailers to ensure timely inventory for sales. For a resilient supply chain, reliable freight partners are essential. Here’s what to assess :
- Transit Time: How long does the shipment take to reach customers?
- Stops & Stop Times: Fewer stops and quicker stops mean faster deliveries.
- Loading Time: Faster loading translates to smoother supply chain flow.
- Route Optimization: Efficient routes save on cost and time.
- Maintenance Schedule: Consistent maintenance reduces breakdown risk (Marotta, 2024).
Use of Technological Innovation
Technology empowers advanced supply chain analytics, enhancing both visibility and transparency. Following are some of the available options under technology:
- Tracking & Monitoring: Sensors, GPS, and IoT devices offer real-time data at every stage, from raw materials to finished products, allowing for:
- Automation: Robotic technologies increase efficiency and reduce human error, even in hazardous environments.
- Blockchain: This secure, shared ledger enhances transparency by verifying product authenticity and tracking goods movement.
- AI & Machine Learning: These powerful tools analyze vast datasets to:
- Optimize Routes: Identify the most efficient transportation routes.
- Predict Disruptions: Identify potential disruptions or inconsistencies.
- Environmental Impact: Gain insights into the environmental footprint of the supply chain.
- Simulate Scenarios: Model potential disruptions and develop contingency plans.
By leveraging these technologies, companies can build more resilient and robust supply chains (McGrath & Jonker, 2024).
Video: “How for Fix Broken Supply Chains | Dustin Burke | TED” by TED [11:02] is licensed under the Standard YouTube License. Transcript and closed captions available on YouTube.
Supply chain management thrives on smooth operations, but risks are inevitable. Supply chain risk management proactively identifies and addresses these vulnerabilities to ensure business continuity. By understanding and implementing Supply Chain Risk Management strategies, companies can build resilience and navigate the complexities of the global market.
