Learn to identify and assess the common risks in your supply chain. We have collated four underlying risk factors that may be present whenever supply chains go wrong.
Offshoring and Country of Origin
Offshoring can have many benefits but if it’s not implemented correctly with checks and balances in place for accountability, it can be difficult for companies to monitor their supply chains. Furthermore, knowing the location of your supplier’s production facilities is important in recognising their vulnerabilities to things such as security threats, geographical hazards and more. Countries that are more susceptible to threats could affect the security of the supplier’s facilities and could cause delays in your supply chain or compromise the products you receive.
It is important to know the physical location of each of your supplier’s facilities and also their suppliers. Due to the complexity of such supply chains, some companies are often unaware of who their suppliers are subcontracting to and the locations of their raw material suppliers. If things do go wrong, your company will have contingency plans in place and react in a timely manner.
Shipment and Delivery Accuracy
Knowing that a supplier can deliver consistently and on time is imperative to assessing the risk factors they pose to your company’s supply chain. It is best practice to communicate periodically with suppliers to ensure shipment times are adhered to. It is also essential to know about the rerouting procedures when unforeseen events, such as natural disasters, interrupt trade routes.
Knowing Internal Processes
Information sharing between companies and suppliers is how companies can gain more of a competitive advantage. Access to a supplier’s internal processes provides priceless visibility into not only the security, but also the measures and controls in place during the manufacturing process. Companies should get their suppliers to explain processes dealing with any activity that may cause a breach or risk factors in the supply chain, for example, how visitors are monitored while on-site, restricted access to cargo and shipments, and how computers and electronic data is controlled and secured.
Social and environmental responsibilities are increasingly important to companies in the current economic climate. In addition, modern communications such as social media can quickly damage a company’s reputation just as quickly as it can build it. Requesting information about whether the supplier abides by laws such as the no child labor law is important, and may even warrant the need to visit suppliers to ensure practices are in line with your company’s brand. Suppliers’ social and environmental responsibilities are becoming a large factor in assessing risk in a supply chain as product safety regulations continue to be proposed and passed into law. This also can pose the threat of significant damage non-compliance can do to demand of a company’s products if it becomes known that there are unethical practices in their supply chain.
By knowing and identifying risk factors in your company’s supply chain, you can have contingency processes and plan accordingly to such risks to decrease your chance at supply chain failures.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.