Supply chain risks are a common problem many businesses face. The first step is identifying the supply chain problems in your organisation. Then it’s time to address them and move forward.
If a supply chain isn’t managed properly, it can lead to many problems that will affect both customers and the company’s bottom line. However, there are some management tools that can help with identifying and managing any problem that may arise. These tools have helped several enterprises and gaming platforms, such as Dragon Born Online, mitigate potential pitfalls.
Types of Supply Chain Risks
Supply chain risks include two main categories: internal and external problems. Internal risks are outside your control, while external ones are within your control. Let’s take a quick look at how you can identify these problems.
Identifying the Internal Supply Chain risks
Manufacturing
Manufacturing risk in supply chain management refers to an event or problem that happens during the production process, causing a negative impact on the customer’s product and operations going off schedule. This could include faulty parts, delays in delivery, interruption in the manufacturing process, or natural disaster interruptions, such as earthquakes or hurricanes.
Business
Business risks are caused by business manners, such as how buyers communicate with the suppliers and customers. Management reporting structures and changes in key personnel can also be the causes of business jeopardy.
Financial
This refers to the possibility that a supplier will encounter an unexpected scenario that could threaten the business’ financial health. This can range from a supplier’s bankruptcy to an unfavorable or unforeseen change in exchange rates. So, how can financial risks in a supply chain be managed? Below are several strategies to help:
- Perform a business impact analysis
- Maintain enough emergency fund
- Have an alternative source of income, such as getting extra cash online
- Carry adequate amount of insurance
- Diversify your investments
- Mitigate concentration of supply
Cultural
This refers to businesses’ cultural tendency to delay or hide negative but crucial information. Such organisations are usually more reluctant to act when impacted by sudden events.
Moderation and Contingency
Moderation or mitigation and contingency risks are caused by the business’ failure to put alternative solutions in place just in case something goes wrong within the supply chain.
Planning and Control
These problems are caused by insufficient assessment and planning, which results in ineffective business and supply management.
External Supply Chain Risks
Demand
Unforeseen or misunderstood customer demands typically cause demand risks. If there’s not enough inventory on hand, you may have trouble meeting customer needs or face lost sales opportunities due to backorders.
Supply
Supply risks are caused by unpredictable interruptions to the product flow, whether parts or raw materials, within the supply chain.
Physical Plant
These are typically caused by the specific condition of a supplier’s regulatory compliance and physical facility. This is a critical area that needs to be monitored. If you are not careful, it can lead to serious safety problems and compliance violations.
Environmental
Environmental risks usually come from outside the supply chain and are generally related to governmental, social, political, economic, ethical, climate factors, and terrorism threats.
Addressing Supply Chain Risks
The most effective strategies to address supply chain risks include:
- Leverage the Prevention, Preparedness, Response, and Recovery (PPRR) risk management.
- Manage environmental risks in the supply chain
- Always check your cybersecurity supply chain risks management
- Improve your supply chain visibility
- Track the proper freight courier metrics
- Implement an adequate logistics contingency strategy
- Data consolidation for easy access
- Conduct an internal awareness training
- Embark on consistent monitoring
Bottom Line
Supply chain risk management is vital to many businesses. Various threats may arise during your business’ operations and daily transactions between suppliers, customers, and other third parties. Have you ever had supply chain problems? Please use the comment section to share your insights.
Author’s Bio:
Thomas Glare started his career as a game tester and became a team manager. After that he moved on to project management and held various positions. For the past three years Thomas has led teams working on art assets for the new UK casino 2021, with hundreds of employees in five different countries at the peak of production.