supply chain business you must know that the strategies implemented to manage the supply chain must be determined by the level of risk that your business.

Supply Chain Business | Demand And Supply Risks | CPRA
Best Methods To Identify And Manage Supply Chain Risks

Methods and Manage Supply Chain Risks

Risk management is very essential for any business that plans to achieve long-term success. Risk management in the supply chain includes mitigation of both occasional and day-to-day risks, with the motive of decreasing related costs, minimizing inconvenience, and increasing profits in the business. The supply chain is the main factor in the manufacturing and retail industries. Without it, you will have no product to sell, no inventory to stock the products, and no revenue to earn.If supply chain risks are managed properly, it would help your business to enjoy the benefits of tried-and-true strategies which eliminate the risk factor and set your business to achieve success.

What are Supply Chain Risks?

Supply chain risks management is the process of making strategies in a business to figure out the risks within their end-to-end supply chain and eliminate them. There are usually two types of supply chain risks – external supply chain risks and internal supply chain risks.Both of these supply chain risks can cause issues in your business, so it is very important to know the differences between the two.

External Supply Chain Risks

As the name suggests, external supply chain risks are the global supply chain risks that come from outside of your business. These external risks are tough to be predicted and require more resources to settle them. There are four common external supply chain risks and they are –

Demand Risks – These appear when you miscalculate the demand for a product. They are usually the product of a lack of insight into year-over-year purchasing trends.

Supply Risks – This type of risk usually occurs when the raw materials required for your business are not delivered on time. This delay disrupts the work process of your industry.

Environmental Risks – Environmental risks are the type of supply chain risk that appears as a result of various socio-economic, governmental, political, or environmental issues which creates trouble by affecting the timings of any process of the supply chain business.

Business Risks – This type of supply chain risk happens due to some unexpected changes taking place with one of the aspects which your supply chain business depends on to run it smoothly.

Internal Supply Chain Risks

Internal supply chain risks are the risks in a supply chain that you can control by yourself. These risks can be easily monitored through supply chain risk assessment software, loT capabilities, robust analytics programs, etc. Internal supply chain risks are easily manageable compared to external ones but they cannot be avoided.

Manufacturing Risks – It is the type of internal risk referring to the possibility where a major component or process of your workflow gets disturbed which leads things to go off-schedule.

Business Risks – Business risks refer to the type of internal supply chain risk which occurs as a result of disruptions to standard personnel, reporting, management, and other factors included in a business.

Planning and Control Risks – It is the most common internal supply chain risk which takes place due to inaccurate forecasting and assessments. It might also be caused because of improper production and management plans.

Mitigation and Contingency Risks – This type of risk is likely to occur when your business does not have any proper contingency plan for disruptions in the flow of the supply chain.

How to identify and Manage Supply Chain Risks?

The supply chain connects your business to the world. So, you need to understand the risks which might threaten the supply chain of your business and use the best management strategies to avoid them. Here, we are guiding you with the key supply chain risk management strategies that might help you out.

Keep Contingency Planning on Priority

Retailers and manufacturers need to have proper contingency planning to ensure business continuity in the event of supply chain disruption. Supply chain risk management and contingency planning of a business intersect with each other when it comes to ensuring your company’s ability to maintain the workflow that supports production.Prioritizing contingency planning emphasizes smooth, intelligent, and proactive measures to avoid supply chain disruptions wherever possible. The two years of Covid-19 caused supply chain disruption on a global scale making the business owners realize the need of having multiple solid contingency plans prioritized by severity and likelihood.

Invest in New and Advanced Technologies

In this era of technology, you must make use of artificial intelligence (AI) and advanced analytics to manage supply chain risks. A centralized, cloud-based data management system enhanced by advanced technologies like robotic process automation would help you to identify the risks associated with the supply chain more accurately and manage them most effectively.You can provide various advanced digital tools to your procurement team to collect, manage, and analyze supplier data. The following best methods can be considered for investing in advanced technologies.

  • Invest in cyber security education for all your employees.
  • Coordinate with your company’s information technology cell to add all the latest security enhancements.
  • Make sure to maintain an updated firewall, anti-virus, and anti-malware software for your business.
  • Get in collaboration with major supply chain partners to develop a great business continuity plan.
  • Create and implement user roles and internal controls to build restrictions to use the system without permission.

Leverage the PPRR Risk Management Model

This PPRR risk management model is considered to be one of the most popular supply chain risk management strategies all around the globe. It is used by various successful brands in the world.

The term PPRR Stands for:

Prevention – It stands for taking preventive measures to mitigate risks involved in the supply chain.

Preparedness – Always prepare a proper contingency plan and implement it in case of any emergency.

Response – It means executing your contingency planning for reducing the effects of the disruptions that occurred in the supply chain.

Recovery – Recovery is all about resuming the workflow and getting back things to normal as soon as possible.


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