All supply chains are subject to various risks and these need to be managed effectively in order to ensure that the supply chain is as effective as possible. But what are the 10 most common supply chain risks that all businesses need to be aware of?
1. Instability: Instability within the supply chain is an inherent risk and the most common risk of all. All supply chains need to be stable – today’s business worlds includes problems with global supply chains, commodity markets growing competitiveness and technology driven capabilities mean that the instable market place can all add problems which need to be managed.
2. Inflexibility: Inflexibility is a risk within the supply chain because it means that the supplier will not be able to cope if there is a sudden increase in demand for supplies. So any supply chain needs to be as flexible as possible.
3. Stock outs: The risk of stock outs is always a real risk and one that needs to be managed effectively so that the supply chain can be made secure and that there are no hold ups in terms of production.
4. Suppliers going bankrupt: One effect of the recession has been to drive many suppliers out of business. They may have work in but if they are unable to get cash flowing into the business and the banks are unwilling to lend, then many businesses simply go asunder.
5. Defects: Defects or shoddy goods are always a risk within the supply chain and they need to be kept to a minimum to reduce the prospect of production being slowed down or even halted as a result of defects.
6. Natural Disasters: Until only a few months ago, no one would have thought that a volcano erupting in Iceland could literally cripple the movement of goods by air. However it did! The resulting pressure on other forms of transport also meant that there was a knock on effect and that supplies were often disrupted. Flooding is another natural disaster that is apparently on the rise, so do not ignore the risk of natural disasters.
7. Information Theft: Hackers or those who send viruses or attempt to disrupt service through electronic means are also a risk within the supply chain, simply because so much business is done electronically. So there has to be a tight back up for all information and data retention/sharing.
8. Sudden increase in costs: Sometimes commodities can be relatively stable for some time and then suddenly they are in demand and the price goes up. This can have a major effect on the supply chain and can lead to it being far less stable than it was previously, simply because it cannot meet the increasing rise in costs.
9. Deliberate acts: Deliberate acts can vary from thefts, to vandalism, to acts of terrorism, so the impact of the deliberate acts can vary from a consignment of goods being set fire to, right the way up to transport links being severely disrupted due to a terrorist act. So in line with natural disasters, the deliberate acts that could affect the supply chain have to be managed and given due consideration.
10. The final common risk that any supply chain faces is simply the loss of suppliers because they are able to secure a higher price for the goods that they supply from someone else, rather than your business. This is obviously a difficult risk to manage, because you want your suppliers to offer you the best rates possible and you do not want to pay over the odds for items, but on the other hand you do not want to cut the supplier’s profits to such a low level that they seek to do business elsewhere!
All in all then, there are a number of common risks that businesses have to consider with regard to the supply chain and there is no single solution to ensure that the risks do not pose a threat to the chain. By their very nature, supply chains are risky!
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