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Posts Tagged ‘Risk Management’

6 Steps to Understanding Risk Management in Your Supply Chain

Saturday, April 6th, 2019

Every business is only as good as the supply chain it’s built on. Understanding issues within the supply chain itself and effective management of the risks are imperative for the survival and prosperity of a company. This will help to maximise customer value and ensure an uninterrupted flow of goods and services.

Leaders need to be able to recognise and understand the risks that are present in their supply chains so they can ensure that products arrive where they are supposed to, when they are supposed to, and in pristine condition.

The problem is, most organizations tend to focus on what happens within their own walls. Few understand and effectively manage the entire chain of events that deliver products to the final destination. The result is a disjointed and often ineffective supply chain.

To help you overcome this issue, here are five steps you can implement to improve the risk management of your supply chain and streamline the entire process.

Know Your Suppliers and Potential Suppliers

There needs to be an effective due-diligence process that can answer any queries you might have about third-party practices. Questions to ask include:

  • Do they have a good track record?
  • Do they fulfil their contractual obligations?
  • Do they have good existing relationships with customers or suppliers?
  • Are there any conflicts of interest?
  • Do they meet the high standards you set within your company?

This list is not exhaustive but if these factors are not considered you run the risk of putting your supply chain, and ultimately your business, at risk. Research each supplier and business you are dealing with so you are more prepared to manage issues when they arise. You may find a certain link in your supply chain is the reason for inefficiencies. In this case, it may be time to find alternatives.  

Get What You’ve Asked For

Monitor the goods and services you receive closely to make sure you are getting exactly what you’ve asked for and, more importantly, paid for. If a supplier starts cutting corners on products or services, it is you and your business who will suffer at the end of it. By working with organised, professional suppliers and couriers you can ensure you are getting quality products and, in turn, your customers are getting a quality service. On average, inventory is accurate just 63% of the time. This shows a drastic need for improved inventory management, which begins by improving your supplier process.

Only Pay for What You’ve Received

You should always ensure that your invoice corresponds precisely with the goods or services you have received. This may seem like an obvious thing to do, but it is imperative that you manage your imports to make sure you are not getting fleeced. This is especially important if you have a complex network of suppliers because it is easier for things to go missing if a blind eye is turned.

A poll of 2660 professionals found that 29% indicated that their own supply chains had experienced waste, fraud or abuse in the past twelve months. This statistic highlights just how common an issue this can be. Approaching the situation with a healthy scepticism rather than an intent to find wrongdoing can help to reduce the risk to your company.

Prevent and Resolve Disputes Effectively

There will inevitably be a time where a dispute is unavoidable on some level of the supply chain. How it is handled can solve or worsen the issue. You want to quickly deal with any dispute so that it promotes smooth running between the links in your supply chain, ensuring that everyone is happy.

By having processes in place that can highlight potential conflict areas you can also avoid disputes happening at all. Effective management of all levels of the supply chain can enable you to do this and the employment of supply chain automation that can spot and reduce human error can also help. This will mitigate risks to your company and enhance the value of it as well for prospective partners and new suppliers.

Avoid Risks in The Sales Process

Management should be aware of the potential risks in the sales process as this can protect the supply chain from a knock-on effect. The sales process is essentially customer demand that ultimately dictates how your company moves forward. As sales channels evolve, they can introduce new risks into your supply chain. For example, opening a new branch to meet new demand can put a strain on the supply chain. To address this, understand the liability that sales interactions expose your company to and how they can affect your sustainability. An expert supply chain manager may be helpful to take on this important role and ensure all sales processes are growing your business, not stalling it.

Use a Quality Courier Service

Your courier team is usually the only face-to-face contact your customers have with your company. Thus, they need to expertly deal with customers and help avoid issues falling back down the chain.

Now is the Time to Focus on Supply Chain Management

With the vast number of challenges faced, it’s no surprise that 85% of global supply chains had experienced at least one form of disruption in the past twelve months. However, proactive risk management in the supply chain is the solution. Many businesses note they spend around 50% less time dealing with supplier disruptions if they have effectively risk managed their supply chain.

79% of companies with high-performing supply chains attain greater revenue growth than the average in their industries. If you needed any more convincing that supply chain risk management needs to be at the forefront of your business plan, let that statistic be it.

Creating value in your supply chain and mitigating the risks it is exposed to will ultimately lead to value in your company and increase the prospects of partnership or investment as well. All of this will help your company grow above and beyond industry norms.

Where to Begin

If you’re interested in finding out how our expert courier team can help you reduce risk in your supply chain, get in touch with Same Day Dispatch Services today. Tel: 0800 999 1010.

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

Thursday, November 15th, 2018

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.

Manufacturing Sector Increasingly Cautious about Supply Chain Risks

Tuesday, September 18th, 2018

With the growing uncertainty surrounding Brexit and world trade deals, coupled with other problems facing the logistics industry including increasing pressures to deliver more rapidly and a shortage of drivers, it’s no surprise that manufacturing companies are becoming increasingly cautious about taking risks in the supply chain.

Trends now show suppliers are increasingly sourcing their goods from countries that are not perceived as high-risk. This is most prevalent in the manufacturing sector but is also being witnessed in the wholesale, retail, and financial sectors.

Sourcing from high-risk countries has traditionally been highest in the manufacturing sector, yet more recent data shows a significant reduction in this trend. This could mean that manufacturing companies are more cautious about offshoring to low-cost markets, which are characterised by higher risk.

Understanding Supply Chain Risks

It’s important for the manufacturing industry to understand the types of risk posed within the supply chain. There are two key types: internal and external. Internal risks are completely within your control whereas external may be outside of your control. As a result, internal issues don’t tend to force a company to be more risk cautious with its chain, whereas external risks do.

External supply chain risks include:

  • Demand risks – these can be affected by a product’s unpredictability or other geopolitical impacts such as changing governments or trade deals.
  • Supply risks – these include interruptions to the supply chain, often at the source of raw materials. This could be the case for natural disasters or bankruptcy.
  • Environmental risks – these are outside of the supply chain itself but have a negative impact on it. Disasters can again play a part but so can changes in rules and regulations.
  • Business risks – these can be caused by factors that affect the financial management of the company, exchange rate fluctuations or sale of companies.
  • Physical plant risks – this is a risk of the companies’ actual building and can also be affected by changes in rules and regulations that cause disruption.

These risks affect the global market and interest rates and therefore can affect how cautious a business is when taking risks in its supply chain.

Factors that lead to a Cautious Industry

So why is this happening? Many raw materials sourced by the manufacturing sector are underwritten by banks or other financial institutions. Any issues surrounding the sustainability or fairness of this sourcing of materials can impact whether the company will be able to secure vital funding going forward. This has led to growing uncertainty and many manufacturing companies avoiding taking risks in their supply chain in countries that may not be adhering to fair trade or sustainable practices.

Another theory may lie in the fact that supply chains are becoming increasingly longer, complex and generally more fragmented, which symbiotically increases the risk exposure for the companies using that chain. As well as uncontrollable variables such as natural disasters around the world and geopolitical events such as Brexit that send aftershocks through industries across the globe.

There are also other global events that can have an effect on supply chain management such as fluctuations in exchange rates, changes to rules and regulations, and even bankruptcy of components of the supply chain. There is a multitude of factors that can all have a negative impact on the supply chain and with risks increasing, manufacturing companies are doing what they can to minimise risk.

Procurement teams analyse the data, trends, and statistics from reports such as the global supply chain risk report and effectively manage the risk of their own supply chains and protect their businesses to some degree. By collating this data together, manufacturing companies can identify possible trouble spots and minimise any negative impact on their own supply chain.

Cybersecurity is an increasingly concerning risk factor for a supply chain in the manufacturing industry. Cyber-attacks in general have become more prevalent in our computer-reliant world and distribution outlets are no exception. By ignoring cyber issues, companies leave themselves open to a host of issues that can compromise their businesses integrity. In fact, it is predicted that cybercrime will cost the global economy in excess of six trillion dollars by 2021.

Because of this, manufacturers are limiting who they are willing to do business with. This includes taking fewer risks on countries that are seen as high-risk for compromise and companies which have not adopted cyber-safety in their processes. Hence, both are equally at risk of being cut out of supply chains to minimise risk.

Connectivity is playing a leading role in whether companies take risks in their supply chain. In a world of 24/7 global trade, manufacturing companies need to be able to keep in touch with the different components along their supply chain. Despite the ability for systems to be integrated using open-source software, the need to be able to constantly update and upgrade the software also puts it at risk. Each modification results in an increased cost, while poorly integrated systems lead to bottlenecks of data and supply issues. One way around this may be to invest in newer, safer technology such as blockchain, which is secure and accessible to all on the supply chain.

Moving Forward

In a world of such global instability and changing regulations, it is no wonder that companies are resorting to becoming more risk-cautious about who they include in their supply chains. Manufacturers are leading this trend as they have more direct access to the factors that cause the greatest risk. As such, it is likely that we will see companies looking to source their materials ethically and to switch over to coded, smart contracts, similar to blockchain, that will help to protect and streamline the supply chain from the source.





August 2019
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