How Can Companies Effectively Manage Supply Chain Risks?
Posted June 6, 2022 in Articles
From the continuing economic impacts of the COVID-19 pandemic to the Russian invasion of Ukraine, several factors are severely disrupting the supply chain for all types of companies in 2022. As major auto manufacturers wait months to receive the semiconductors they need to keep their assembly lines moving, other businesses find themselves struggling to meet customer demand due to shortages and delays involving materials, ingredients, solvents and other essential products.
5 Tips for Effective Supply Chain Risk Management in 2022
Given that there is currently no end to these issues in sight, what can (and should) companies be doing to manage their supply chain risks? Here are five tips for effective supply chain risk management in 2022:
1. Mapping the Supply Chain Network
Companies that have not already done so should map their supply chains from end to end. Before companies can address supply chain risks, they must first know exactly where these risks lie. Is your company’s direct supplier the issue? Or, does the issue exist further down the line? Answering these types of questions is fundamental to effective supply chain risk management.
2. Modeling Risk Scenarios
Supply chain risk management should be a proactive business operation. With this in mind, even if a company is not facing supply chain issues currently, the company should model its risk scenarios so that it can plan ahead. With a proactive risk management strategy in place, the company will be able to avoid (or minimize) any potential disruptions in the future.
3. Auditing Suppliers’ Operations and Contingency Plans
Companies’ agreements with suppliers should include provisions that allow them to audit their suppliers’ operations and contingency plans. By exercising this audit right, companies can determine if their suppliers present risks; and, if so, they can work with their suppliers (or replace them) to address issues as necessary.
4. Diversifying the Supply Chain
Rather than relying on a single supplier, it may be prudent for companies to diversify their supply chains in 2022. Of course, there are efficiency and volume pricing considerations here as well. But, if relying on a single supplier puts a company’s product line (or the company as a whole) at risk due to factors beyond the company’s control, then diversification may be the best option—at least in the short term.
5. Bringing Operations In-House
Finally, given the supply chain issues companies are currently facing, some companies are choosing to bring outsourced operations in-house. If a company can manufacture or assemble necessary supplies, components or inventory independently, then developing the capability to do so could be the company’s best option.
Schedule an Appointment with a Consultant at Mithras Investments
Mithras Investments is a business consulting firm that helps companies in a broad range of industries effectively manage their supply chain risks. If you have questions about what your company can (and should) be doing to manage its risk in 2022, we encourage you to call 305-517-7911 or contact us online to arrange an initial consultation.