4 Supply Chain Risks of 2019 and How to Minimise the Threat

4 Supply Chain Risks of 2019 and How to Minimise the Threat

Supply chains are the bloodline of any business, so there is huge importance placed on optimising the supply chain and reducing error. With the rise of technology and the rapidly increasing pace of business, it’s now more important than ever to minimise risks associated with the supply chain and ensure the entire process is as streamlined as possible.

In recent surveys, the biggest risks to supply chains were investigated. This post goes through 4 of the top risks we are currently facing this year and how to minimise risk to your own supply chain.

Political Unrest

The ever-changing face of the political climate takes a toll on almost every industry. Political impacts such as Brexit are likely to affect how goods are bought, where from, and how they are distributed, with trade tariffs and other trade barriers shaping the landscape of logistics and supply chains. The biggest risk to supply chains from this will be the increased cost of doing business. Other trade regulations on movement might also create issues further down the line.

What’s more, cargo becomes locked during political unrest. Industrial disputes and geopolitical turbulence could result in disruption to transport operations and lead to cargo stranded in ports and warehouses, which will lead to disruption of supply chains and increased cost to the companies who have their product stuck in limbo.

Changes to suppliers’ structures put supply chains under further threat. As supplier insolvencies rise, smaller companies struggle to cope with the burden of uncertainty in the economy, invariably putting a strain on larger companies that need to find new parties for the supply to avoid disruptions. As the casualties rise, the burden of new supply chains will also rise.

Border issues will also lead to delays in the supply chain. With major trade routes under threat from geopolitical disputes such as American-Mexican tensions and the uncertainty of Brexit, borders will become more secure and the time it takes to pass through the borders will become longer, leading to disruptions in global supply chains.

Increasing Demand

Rising demand will lead to shortages of raw materials. This is driven by a combination of rising political instability in certain countries as well as an increasingdesire for ethically-sourced materials.

Hence, supply chains will move away from suppliers with crucial raw materials that are subject to new regulations or are unable to source materials ethically, leading to an overall shortage in the face of increasing demand.

Stricter regulations and quality requirements will put quality under more scrutiny than previously seen. As regulations change and the uncertain political situation bears down on suppliers, the quality of the products they are providing will be scrutinised more and disruptions to the supply chain will occur as a result.

Climate Change

Climate change is increasingly impacting the supply chains for many companies. Weather-related disruptions are predicted to increase through 2019 and into the future, includingnatural disasters that put a burden on shipping and sourcing of raw materials. Twinned with expectations of the warmest year yet, climate change may impact several stages of supply chains, making manufacturing and distribution more difficult.

When it comes to the logistics industry, the price to pay for climate change is tougher environmental regulations. This will likely affect the Asian-Pacific area more than most but regulations regarding the impact of companies’ pollution on the environment will squeeze manufacturers and distributors around the globe. This will force companies to pull their supply chains closer to home in order to cut costs of worldwide travelling and avoid pollution penalties.

Advancing Technology

Advancing drone technologies are already leading to aviation safety fears. Close proximity aviation safety incidents are predicted to become more frequent as the use of drones in the supply chain for delivery increases. Due to this, we may now see more regulations guiding the way that deliveries are made.

As well as advancements in drone technology, cybercrime will continue to be a disruption for supply chains.Cybercrime has the ability to bring a system to its knees or hack in and alter funds, inventory or even driver routes to make robberies easier. With technology continuing to advance and become more integrated with the supply chain, the threat of cybercrime also becomes more prominent.

How to Minimise Risks to The Supply Chain

The most important strategy for minimising supply chain risk is having contingencies in place in case of disruptions.

Supply chains varydepending on the industry and specific company, therefore, there is no single solution for all companies to implement. However, proper management and budgeting for unforeseen issues are the first steps to minimise risk.

When you think of all the elements that can cause risk, they stem back to a company’s financial health. A weak foundation isn’t going to give a solid base for everything that is built on top of it. Hence, the more confident you are in your business processes, the less risk you’ll face in the supply chain.

Secondly, evaluating risk management through collaborations will allow companies to reduce the risk associated with the uncertainty of the political climate. Centralising systems that allow high-risk areas to be shared by all parties will help to reduce the risk to supply chains. Collaboration and the commercial value of transparency are key for risk management. Hence why companies are now looking to blockchain to help improve transparency and data collection throughout the supply chain.

Building on this, the collection of data and proactively using it to put plans in place to reduce the risk of supply chain disruption is crucial. Too many companies know there are uncertain times ahead but are not planning to deal with it effectively. Having the data is one thing, using it strategically is far more necessary.

Overall, knowledge is power when planning to minimise risks. Evaluate your entire supply chain, pinpoint weaknesses and create contingency plans to minimise disruptions. This is the best way to prepare for potential risks ahead.

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May 2024