Today’s supply chain is more intricate than ever, relying heavily on the global exchange of goods. The global supply chain market is set to experience a compound annual growth rate of 11% until 2027. While this expansion opens opportunities for worldwide sourcing and sales, it also escalates the associated risks. Neglecting to address these risks within the supply chain can lead to dire consequences and jeopardize a company’s survival when these risks materialize.
What is Supply Chain Risk Management (SCRM)?
Supply Chain Risk Management (SCRM) encompasses the execution of measures aimed at managing risks that traverse the entire supply chain, encompassing both common and extraordinary risks. This strategy begins with a continuous risk assessment, seeking to reduce vulnerabilities and ensure uninterrupted operations. SCRM serves as a means to guarantee the seamless functioning of a business.
The SCRM approach follows a structured sequence of steps: identification, assessment, control, and monitoring. It can be applied to different facets of the business, such as procurement, logistics, or sales. The specific actions taken may vary depending on the area under consideration. For example, the procurement department might focus on category plans and upstream tier flows, logistics might prioritize supply plan visibility and responsiveness, and sales may concentrate on enhancing the customer experience and understanding customer behavior.
When executed effectively, the SCRM methodology substantially contributes to a thriving business by minimizing exposure to risk.
Strategies for Supply Chain Risk Mitigation
- Diversify Your Supplier Base
Recent data reveals that companies heavily reliant on a single supplier face a higher risk of supply chain disruptions. In fact, a survey conducted by Resilinc, an AI-based supply chain solutions provider, found that single-source suppliers are more likely to experience disruptions, impacting 72% of surveyed companies. To mitigate this risk, diversify your supplier base. Consider working with multiple suppliers for critical components or materials.
- Inventory Optimization and Risk Buffer
According to Supply Chain Digest, the amount of inventory on hand based on average daily sales has increased by 8.3% over the previous five years. Approximately 46% of small-to-medium businesses don’t track inventory or use a manual method instead. Implementing just-in-time inventory practices can be efficient, but it leaves little room for error. A well-optimized inventory strategy acts as a risk buffer, ensuring a steady supply even when unexpected events occur.
- Leveraging Technology for Real-time Transparency
A study by Accenture says, “the success of supply chain efforts hinges on putting data at the core of the supply chain and applying AI to it at scale to create a connected and truly intelligent supply chain”. Technologies like AI and blockchain provide transparent and immutable records, enabling businesses to trace product origins effectively. These technologies provide insights into each stage of the supply chain, from raw materials to delivery.
- Collaboration and Risk Sharing
Open and collaborative relationships with suppliers and partners are essential for mitigating supply chain risks. Frequent and transparent communication with suppliers is critical. Work with your suppliers to understand their risk management strategies and contingency plans. By aligning your risk mitigation efforts, you can collectively navigate disruptions more effectively.
- Data-Driven Business Continuity Planning
According to a 2020 survey by The Economic Times, 51% of companies don’t have a business continuity plan. In an era of data-driven decision-making, business continuity planning must be based on recent data and insights. It is important for companies to regularly update and test their business continuity plans. Scenario-based planning is essential as it enables businesses to navigate diverse risks effectively.
Conclusion
The modern business landscape demands a data-driven approach to supply chain risk mitigation. By implementing these advanced strategies, businesses can enhance their resilience and ensure uninterrupted operations, even in the face of unforeseen challenges. eSoftLabs offers robust, AI-enabled supply chain management services designed to ensure business continuity even in the face of disruptions. Our warehouse and logistics management solutions enable businesses to navigate the complexities of the modern supply chain landscape with confidence and resilience. Know more:
