Working Out Kinks in Your Supply Chain

One of the fastest growing issues among businesses worldwide? Supply chain risk. Your operation can be running smoothly, but a hiccup on the other side of the world, or even just across town, can leave you spinning.

Whether caused by natural disaster, political upheaval, loss of raw material, a labor strike or a myriad of other possible catastrophes, you can be left without critical supplies if you aren’t adequately prepared.  Unfortunately, weak economic conditions often increase odds of supply chain failure, particularly when you’re receiving inventory from smaller suppliers because they tend to run leaner and are less likely to have safeguards in place.

Identifying conceivable scenarios which put a supplier-and ultimately you-at risk is just the first step. After that, you need to evaluate the likelihood of each scenario actually happening and the potential financial impact to your own organization, both short and long term. Knowing this will help you rank which supply chain risks should be addressed first. Taking such a systematic approach, will also help you avoid becoming overwhelmed by the enormity of issue.

Starting at the top of your list and working down, you can develop specific mitigation strategies. They might include items such as:

  • Simple monitoring of risks considered manageable
  • Selecting different suppliers all together or sourcing from multiple regions of the world
  • Developing options for back-up transportation
  • Changing product design to accommodate more standard components
  • Building inventory to protect against short term interruptions
  • Securing protection with business interruption insurance

The solutions are as varied as the risks, but the goal is always the same-to keep you going when a supplier fails to deliver. And even if you don’t develop a detailed plan, avoiding reliance on a single supplier or just-in-time-inventory could be a major improvement in current risk levels.

Consider the fact uncovered by A.T. Kearney’s 2011 Assessment of Excellence in Procurement study: nearly 80 percent of companies are just one disaster away from major business interruption.  Don’t let that be you.