Jan

24

In times of crisis Supply Chain risk management

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Whilst risk management is often thought of in terms of Project Management disciplines – risk management is also a crucial process in the world of supply chain.

Supply chain has a key role to play in supporting business continuity – with so many facets of a business susceptible to crisis (especially where undesirable change is either imminent or underway) – organizations must develop suitable processes that are enable a business to operate whilst deliver a positive outcome.

But how does this relate to supply chain? Consider for a moment the impact of delays (or a business that is at complete stand-still) for commodities or raw materials. An interruption in the material flow of parts can at best make it uncomfortable for the business and at worst create an environment that puts it under considerable financial threat. Being able to manage these issues and crisis in terms of material flow typically falls under the remit of the supply chain function.

Types of supply chain crisis

Supply chains are open to various influencing factors both internal and external – from government legislation through to logistics and distribution channels, from local supplier networks through to outsourced providers on the other side of the world. But whilst interruptions within the supplier network are all too common causes for interruptions it must be remembered that it is not just businesses that may impact an organization – disruption caused by natural events and disasters should also be considered and impact this might have.

Clearly when understanding risk – the scale of the impact should be considered – this can help determine the importance of mitigation and possible capital outlay required. Determining scale can be complex for example if a crisis occurs will it impact just a single supplier or the commodity? Can alternate supply be found and transitioned quickly?

Whilst consideration must be given to identifying and mitigating concerns, when an organization determines its processes they must not overlook the potential for an issue to occur and be realized and therefore processes must include how an organization will respond and what activities it will undertake to recover.

Conclusion

Disasters confront the supply chain every day – from missed deliveries that may hold up a production line through to niche suppliers going out of business or key parts becoming obsolete. What is crucial is that organizations plan on how they will sustain their business in times of challenge.

Whilst it would be impossible to have foresight of every issue that a business might face developing appropriate processes and systems that attempt to capture and mitigate issues before they arise whilst protecting a business with appropriate systems that can deal with challenges and emergencies if they do occur.