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Building a business has never been an easy task. The challenges are many and varied; the business scene is one of changes and surprises and can feel overwhelming and exhausting at times. However, an invaluable tool for businesses is supply chain risk management software – let’s break that down and see if it could be a fit for your company.
What is Supply Chain?
Let’s go back to basics. What is a supply chain? This is a network linking a company with its suppliers, with the goal to manufacture and distribute a particular product amongst the end buyers and consumers. It also involves the specific steps necessary to take to get the original product or service to the customer. The supply chain is something that a business must constantly develop and maintain to reduce costs and stay ahead of its competition. The aspects within a supply chain include producers, vendors, storage providers, transporters, distributors, and retailers. The functions of a supply chain involved developing, marketing, and distributing the product and managing finance and customer service.
What is a Supply Chain Risk?
Your supply chain is not impenetrable, and the network links between you and your suppliers are not unbreakable. The threat of this is known as a supply chain risk. The risks are numerous and diverse, from harm to integrity and reputation, to events that heap pressure onto the distinct links in the chain. These risks include threats and vulnerabilities to do with the several products and services that make up your supply chain. These risks menace the design, production, or distribution of an item of supply or a system involved in the supply process.
What are the Supply Chain Risks Now?
The supply chain risks change all the time, but there are a few specific risks that global companies can look out for and prepare for in the next 12 months. The business landscape is still recovering from the effects of the pandemic, and other global uncertainties threaten various aspects of supply chains around the world. Here are the top 5 supply chain risks for 2022.
1. Worldwide Water Instability. It is expected that by 2025, two-thirds of the world’s population will face a shortage of water. Water is necessary not only for life but for many businesses and their processes. For example, producing and cooling the equipment for pharmaceutical companies, technological products, paper development, garments and even food processing.
2. Bottlenecks of Ocean Freight. With the combination of low levels of inventory, booming consumer demand and the ongoing impacts of the COVID-19 pandemic on logistics, there will continue to be congestion and delays for the cargo industry in 2022.
3. The Constant Changes to the Workplace. The pandemic’s continuing effects are still changing workplace behaviours as the risks of infection force companies to revaluate the safety of their place of work. These adjustments need to be made; if not, the long-term disruptions that come from outbreaks are far more impactful.
4. The Change from “Just in Time” Inventory System to a “Just in Case” Inventory System. The pandemic highlighted the flaws of a just-in-time inventory system, where a company receives goods as near the required time as possible. For example, if a car manufacturing plant needs to install airbags, they won’t keep a stock of airbags but simply order them as they need to go straight onto the assembly line. Since the pandemic, more companies are shifting to a “just in case” inventory system, where companies store a large amount of stock so that it is always available. This reduces the risks of being without a needed product and increases the safety stock of critical or best-selling items. However, a company that uses this system will find it more difficult to product demand and might experience a surge in demand at unpredictable times.
5. Increased Scrutiny of Regulations. In an effort to combat global issues, disclosing sustainability information and reporting requirements is becoming more essential and more detail is being requested by governments, investors and even customers. These regulations are only expected to increase in the future.
What is Supply Chain Risk Management?
Prevention is better than a cure, and this is the same principle in the business world. Supply chain risk management applies several different strategies to manage risks and limit the effects of potential weaknesses. It is a continual, ongoing process that requires constant attention and updating. This being the case, making use of a supply chain risk management software system will make your life a whole lot easier. Three main areas fall under the umbrella of supply chain risk management.
1. Identification. Like a doctor diagnosing an illness so a patient can be cured, threats to the supply chain must be detected early on. To do this, you can brainstorm, interview, collect data and do even more research to ensure you stay ahead of the curves and pitfalls to be ready for any surprises.
2. Analysation. After the threat has been diagnosed, the chance of the risk needs to be examined. You also need to know what the impact would be if the risk were to happen.
3. Evaluation. Evaluate the risk in an actionable and quantifiable way so you can make informed decisions based on the available information. Evaluate the impact on your profit so that you can understand the specific links in your supply chain that need to be more closely monitored.
Use Technology to Make Your Life Easier
It might seem like an overwhelming prospect when considering the risks of your supply chain, but technological options are available to assist. Modern systems can rapidly gather data from several sources to complete the three areas previously discussed. You will also be offered lower-risk alternatives so that when a risk is identified, you know which steps to take.
You may also like: 7 Tips for Staying in Business with Supply Chain Issues
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