Tips to Counter Supply Chain Management Risks
The risks inherent to the whole mechanism of supply chain management have the potential to derail even the best laid plans to optimize value through the value chain. However, there are ways to control the probability of a risk materializing. The first and the foremost thing to do is to ensure that the supply chain risk management exercise is holistic and integrated. Usually a risk management strategy that is not integrated with the whole supply chain environment results in a conflict of cost versus risk.
It cannot be refuted that supply chain cost-cutting measures increase risk. But at the same time, cost consciousness can also reduce supply chain risk, if the focus of the processes is on core trading partner relationship management. The primary way to manage such relationships is to draw up a contract, which includes clauses regarding transaction compliance measurement, rebate and charge-back management, and supplier score recording. Such mechanisms increase the visibility of the trading partners’ performance, thereby reducing risk.
Further to mitigate the risks involved it is necessary that supply chain managers regularly collaborate with co-workers from other departments such as purchasing, logistics, traffic, and other departments.
It is only after in-depth interaction with those working in other department that you get to know exactly the soundness of the supply chain and its vulnerabilities. Such interactions give a clear idea about how well the supply chain is ready for tackling any contingencies.
A lot of supply chain managers ignore a risk just because they can’t quantify it. A classic case is the costs involved in a supply chain disruption that results in a stock-out. It not only results in just lost sales, which might be readily quantified, but also lost customers.
It is imperative to even account for losses that are not easily quantifiable in the risk portfolio. So, an overall preparedness towards supply chain management risks is central to glitch free functioning of any modern supply chain.
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