Supply chain risk management, also known as SCRM, refers to an approach to management for all kinds of risk, all tiers of supply, and all risk objects, including ports, locations, suppliers, and more. In addition, it refers to the process of taking the required steps to identify, assess, and reduce the risks of an organization’s supply chain.
Supply chain risk management is a critical enabler integrated and embedded into an organization or enterprise’s core processes when done well.
Implementing the right supply chain risk management strategies can help an organization to operate more efficiently, decrease costs, and improve customer service.
During this guide, we will discuss everything you need to know about:
What is supply chain risk? According to the supply chain risk definition, risk management in supply chains is how retailers take steps to assess, identify and mitigate risks within their supply chain.
There are several different types of typical supply chain risks, including both internal and external threats. The factors listed below should be kept top-of-mind when performing a supply chain risk analysis.
Internal supply chain risks include any supply chain risk factors in your organization’s control.
These can be identified and monitored using supply chain risk assessment software, vital analytics programs, and IoT capabilities. Here are some of the internal supply chain risks:
External supply chain risks refer to global supply chain risks that come from outside of your organization. These supply chain risks are typically more challenging to predict and require more resources to overcome. Some of the external supply chain risks include:
But how does supply chain risk management work? There are three key steps involved in the supply chain risk management process, including:
Supply chain risk mitigation can be difficult because of globalization and possible cyber interference. However, there are specific measures you can take to limit your business’ exposure to supply chain risks:
Prevention refers to taking preventive measures for supply chain risk mitigation, while preparedness means creating and implementing a contingency plan in case of an emergency.
Response refers to executing your contingency plan to decrease the disruptive event’s effect, while recovery means resuming operations and getting things running normally as quickly as possible.
This software allows you to take a more proactive approach to risk management by offering better visibility into your supply chain structure.
With this solution, you can identify any weak points in your supply chain and receive insights, based on data, into how you can strengthen your supply chain.
Environmental risks can make these vulnerabilities even worse. That’s why it’s crucial to implement cyber supply chain risk management strategies. These strategies could include establishing compliance standards for third-party vendors, defining user roles, and implementing security controls to restrict who can access your system.
You’ll need software solutions that give you total visibility into your supply chain, establish backup controls to safeguard your data backups, regularly update your company’s anti-virus, anti-spyware, firewall software solutions, and more.
This can help you create better business relationships and decrease your supply chain risk vulnerability.
Transit time refers to the number of hours or days it takes for a shipment to come to a customer’s location after leaving a facility. The average loading time refers to the amount of time it takes to load a carrier with freight after it has arrived at the loading dock.
We recommend the following tips when developing a contingency plan for supply chain risk mitigation. Map out your supply chain to gain a better understanding of which entities are vulnerable to risk.
Perform a whole assessment of suppliers based on factors like economic, political, and geographic risk, diversify your supplier network so that you don’t rely on a single supplier, and audit logistics providers based on their disaster plans.
You should also establish a crisis response team to develop decisions in case of an emergency and create solid communications channels so that your employees know their responsibilities in the case of supply chain disruption.
Your training curriculum should include risk management best practices, common supply chain management risks and challenges, supply chain risk assessment software training to encourage end-user adoption, and computer and internet best practices to increase cybersecurity awareness.
Most organizations assume that they are secure once they have created and implemented a supply chain risk mitigation framework. Still, every level of your supply chain must be observed as carefully as possible to spot any potential risk indicators.
The best way to consistently monitor risk is to invest in a scalable digital retail solution that automates your risk monitoring for all parts of your supply chain.
This software will offer you security and peace of mind, as well as essential data and insights into how you can better streamline your business operations.
You can use these data models to determine what could happen during worst-case scenarios and create comprehensive contingency plans that will prepare your organization for and when disasters happen.
We recommend making it easier to leverage data science, predictive analytics, and data modeling by investing in a full-scale solution that keeps your data in one single, centralized, and well-organized place.
If you want to learn more about supply chain risk management, look no further than Trade Beyond. We have procurement solutions that transform the way retailers and suppliers collaborate. From the planning stage to the point of purchase, our software simplifies sourcing, improves communication, enhances connections with buyers, and so much more.
Contact us today to see what we can do for you!