The supply chain comprises various activities and business operations ranging from material sourcing, production of goods, and delivering the finished goods to the customers. All of these processes and functions aren’t risk-free, companies have to analyze and manage risk at every stage of the process. Today, we’ll discuss supply chain risk analysis; potential SC risk factors; how to conduct SCRA, and key strategies for doing it.
What is Supply Chain Risk Analysis?
Supply chain risk analysis is the method of recognizing, analyzing, and decreasing the risk factors relevant to supply chain processes. Launching global SCRA strategies and practices allows companies to amplify customer service, decrease costs, and improve various processes efficiently.
However, SCM comprises various activities and processes varying from sourcing, production, processing, and distributing the finished goods. The disruption in the SC processes is bound to happen due to various factors, and it would jeopardize the end results. The SCRA executes the plan after analyzing daily operations with the objective of decreasing vulnerabilities and making sure of continuous improvement.
Potential SC Risk Factors
Some of the main potential risk factors that would impact supply chain processes are as follows;
- Financial instabilities and bankruptcy of the supplier
- Cybersecurity risks like data breaches and system failure
- Geopolitical risks like trade wars, trade sanctions, etc
- Natural disasters like floods, earthquakes, and hurricanes
- Disruption in transportation due to fuel shortages, trucking strikes, and port congestion
- Labor disputes like protests and strikes
- Quality issues due to the low-quality supplies
SC Risk Analysis Strategies
Some of the main strategies for supply chain risk analysis are as follows;
Centralized Data
If you are employing different software, solutions, and applications, then it becomes the main cause of disruption for risk management. It is because you are receiving data from various disparate sources. You should consider investing in a well-organized and centralized data analysis and management system. It allows you to perform data analytics, data sharing, and predictive insights.
Risk Evaluation
The simplest and easiest method of evaluating and monitoring your risk factors consistently is to invest in digital scalable software that would automate your SC processes. It offers you key insight, reassurance, and safe methods to streamline your SC processes and operations.
Better Risk Management
Some of the main steps you should take to improve your cyber security defense system are as follows;
- Launching training programs for your employees to follow the cybersecurity protocol
- Carefully analyzing all the vendors, suppliers, and service providers before signing contracts with them
- Clearly defining roles for all the users and implementing security protocols to make sure that only authorized personnel should log in to the system
- Establishing standards and protocols for 3rd party suppliers to comply with SC processes
PPRR
The term PPRR comprises elements like prevention, preparedness, response, and recovery. It is a well-recognized SCRA strategy that many businesses and companies implement it. However, PPRR allows businesses and companies to focus on continuous planning and improvement. Different readymade templates are available for companies to follow and implement the PPRR methodology.
How to Conduct SC Risk Analysis
Some of the main steps involved on how to conduct supply chain risk analysis are as follows;
Recognizing Risks
There are various unpredictable events that would disrupt the flow of SC processes, and they would result in the form of customer dissatisfaction, low sales, heavy expenses, and delays. It means learning from past patterns, studying current trends, and predicting future events.
However, if you are carefully studying the existing trends and previous patterns, even then it is difficult to predict future events. When it comes to prediction and forecasting, it requires you to pay heed to details like the company’s retailers, manufacturers, distributors, suppliers, and location.
Risk Scores
It is necessary to comprehend the risk per channel and location and its impact on the SC processes and network. Scoring the risk factors is a great method to achieve transparency into the issues that need immediate attention. However, the representation of risk scores could be in the form of graphical, color, and numbers that how one risk factor is relevant to another in the SC process. It allows you to prioritize the risk factor at the right moment.
Outlining Response Plan & Mitigation Strategies
Many companies have a limited contingency plan because they don’t allocate sufficient time and resources for the development of contingency plans for the risk factors. Studying every possible scenario with a “what if” approach may seem time-consuming. However, it is a highly effective approach because it makes sure that everyone is aware of the situation and how they should respond in a certain situation.
However, we are aware of the fact that things don’t exactly go as planned. If you have analyzed various options and scenarios, then it allows you to put yourself in a better position, when a crisis comes up.
Setting up the SCRA Plan
You should carefully develop the strategy and plan based on the information and data that you have gathered in the previous stages. Every business faces unique types of risks and they have to develop a unique strategy for their problems. Some of the factors that you should keep in mind are as follows;
- Talk with big suppliers
- Buy more raw supplies
- Supplier Eligibility
- Talk with main suppliers
- Find other service providers
Conclusion: Supply Chain Risk Analysis
After an in-depth study of supply chain risk analysis; we have realized that SCRA is highly significant for the growth of your business. If you are learning about SC risk analysis, then you should keep in mind the abovementioned definition, strategies, and guide on how to perform analysis.
References
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