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Your supply chain is an integral part of your business. If one part of your supply chain goes down, the effects can be far-reaching and disastrous. In a worst-case scenario, you may even need to halt business operations. Now, you’re facing a whole new set of problems.
While you can’t plan for every risk, there are different techniques for mitigating supply chain risks. Some may already be part of your operational strategy, and others can give you something to think about. To help inform you, here are a few simple tactics you can use to help reduce risks to your supply chain.
Assess Your Risk Potential
Before you can start implementing mitigation strategies you need to know what your risks are. For example, is the majority of your supply chain located overseas? What about weather, political, or labor risks? Performing an audit will help you identify these and other risk factors.
You may also want to reach out to others in your industry—find out what incidents with their supply chains they’ve faced over the years, and take a closer look at your suppliers. Do they have the tools and experience to overcome risks as they happen?
Prioritize Your Risks
Prioritizing your risks means looking at the chances of the problem occurring. For example, if part of your supply chain runs through an area well-known for bad weather, there’s a good chance of encountering delays.
However, if you’re worried about workers going on strike but everyone is happy with the job and benefits, you can probably move this potential risk way down your list of priorities.
Create a Diverse Supply Chain
You may be working with the same supplier for years and everything’s going great. Congratulations! You don’t need to change this relationship, especially if everyone’s happy. What you don’t want to do is rely on only one or two suppliers. If you do, you might as well ask for an issue to occur. Remember the adage: don’t put all of your eggs in one basket—this definitely applies to your supply chain.
Start diversifying your supply chain with people based in different locations. This way, if a hurricane knocks out the roads in one area, you can simply switch to another supplier. You also want to pay attention to any potential risk changes. This includes staying on top of regulatory compliance standards. These can change almost yearly, so pay attention to any updates.
Know the Quality of Your Suppliers
Even if you’ve never had an issue with your suppliers, now’s the time to double-check quality. The last thing you want to do is wait until a problem pops up. Then, it’s too late to start implementing any risk mitigation strategies.
So, how do you assess supplier quality?
- What is the quality of the goods and/or services they supply
- Where is the supplier sourcing their materials
- How efficiently are employees managed
- Is the supplier financially stable
Another metric to check is the supplier’s availability. Can you easily interact with them before, during, and after shipping? The answers to these questions will help you determine if your supplier is taking steps on their end to minimize any potential risks.
Create a Strategy to Help Reduce Risks
Okay, you’ve identified the potential risks to your supply chain; now the next step is to create a risk management strategy. This is a strategy you have in place that helps to minimize and deal with the risks.
As you’re creating your plan, you’ll want to bring others on board. This includes your suppliers, data management centers, carriers, and even customers. Each plays a vital role in your supply chain and will have ideas that can help you create an effective strategy.
Keep Up With Your Insurance
You keep up with your insurance, and this includes coverage for goods and cargo, but what about your suppliers? Do you know what coverage your suppliers are carrying? If not, now’s the time to find out. Your business insurance doesn’t always cover every supply chain incident. If your goods are lost to negligence on the part of your supplier, you may be stuck with a loss.
Another good idea is to keep all of the insurance paperwork in one convenient location, usually online. This way, everyone in the supply chain can access the information as needed.
Reducing Supply Chain Risks is Good Business
While it’s impossible to anticipate every potential disruption in the supply chain, businesses can implement strategies to mitigate risks and safeguard their financial stability. By adopting a proactive approach to supply chain management, companies can enhance their resilience against unforeseen challenges.
This involves diversifying suppliers to avoid dependency on a single source, investing in technology for real-time supply chain visibility, and developing robust contingency plans that can be activated in response to disruptions.
