Don’t Delay Risk Management for Supply Chains Any Longer

A large part of companies was caught completely unprepared for volatile supply chains when the Corona crisis hit! In the report, author Daniel E. Bubendorf points out that companies should urgently address risk management along their supply chain. Not only to cope with the current situation but also to be better prepared for a possible next crisis.

By Daniel E. Bubendorf

(Magden) Corona has shown us that it makes sense to have established efficient risk management along the supply chain. This includes out-of-stock situations, missing electronic components in a production line, or even the standstill of entire production facilities. There is no room for sugarcoating here. The fact is that potential losses from a supply chain disruption can far exceed the investments in professional supply chain risk management.

A solid risk prevention strategy combined with appropriate measures and processes can indeed secure the economic survival of a company. Supply chain managers must realize that a risk management system does not function like a device that is stored away and waits to be used.

Consider it a Continuous Process

Risk management should rather be viewed as a continuous process that must be regularly questioned and adapted to current conditions. This means that to find out whether a company is facing new risks, a regular review of the situation is necessary.

To avoid or manage risks and their negative impacts, it is therefore essential for responsible supply chain managers to establish and operate risk management along their inter-company supply chain. In relation to the entire supply chain, this involves identifying, assessing, managing, and monitoring risks that could threaten objectives such as costs, product quality, and delivery quality.

Possible weaknesses and risks along the inter-company supply chain can be uncovered through periodic risk analysis. In any case, all production sites and main offices of suppliers and sub-suppliers (Tier 1 – 3) should be identified and analyzed. Especially in collaboration with Asian suppliers, it is crucial to also know their suppliers.

Consider Possible Disruptive Factors

Possible disruptive factors such as insolvency, unexpected business closures, or even potential political upheavals should be taken into account during the analysis. It is a truism that only with current data, facts, and figures can targeted countermeasures be implemented. Supply chain experts therefore recommend a permanent mapping of supplier relationships, which – supported by artificial intelligence (AI) among others – can function as an early warning system and be utilized.

Furthermore, supply chain risk management can be strengthened by diversifying the supplier network. This means that to secure the supply of certain products or components, we advise against relying solely on a single supplier or on multiple offers from the same location or a single region.

Daniel E. Bubendorf is a supply chain, procurement, and logistics expert with many years of extensive practical, project, and industry experience. He has held various leadership positions in the logistics industry. Daniel E. Bubendorf is the founder and owner of The Supply Chain Experts GmbH.

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