How to Manage Supply Chain Risks

From startups, to small operations, to large corporations; one of the common methods many businesses use to get an edge is to go global. This can involve anything from moving manufacturing to a more affordable foreign location, to actively expanding operations and sales to an international level. As the supply chain grows longer and branches grow further, increasing complexities and risks will occur that require proper management solutions to avoid harming your business.

The Importance of Risk Management

A disruption at any part of the supply chain will have ramifications on every ensuring step. As your business’s supply chain becomes more global, both the chance of a disruption occurring and its possible severity increases. This can include natural disasters like hurricanes or earthquakes to performance issues like lost shipments. Every additional part of the supply chain is another step where something can go wrong, which is why a comprehensive risk management plan is so integral.

By forming proper procedures and plans for anticipated risks as well as having strategies to identify and respond to unexpected developments, disruptions to the supply chain can be minimized.

Understanding Local Laws and Customs

Working with people abroad means working with their culture as well. While not a direct supply chain risk, working globally means knowing how to manage your supply chain alongside different cultural and legal norms. Legally, this means learning about the different import/export procedures, transportation laws, and contract enforcement laws, among others. Culturally, this means understanding and working with people who may have different restrictions on when they can work, awareness of foreign holidays, and keeping informed on labour developments. By properly responding to both, you will not only avoid inadvertent disruption to the supply chain, but foster better working relationships as well.

Understanding Qualitative or Quantitative Risks

Speaking generally, supply chain risks are either qualitative or quantitative. A qualitative risk is one that affects the reliability of the product. Situations like defective merchandise, inaccurate shipping reports result from a lack of proper oversight and responsiveness in the supply chain.

A quantitative risk is one that affects your available stock. Being out of stock, having overstock, and managing unexpected drops or spikes in demand are good examples.

Both forms of risk can come from ineffective communication, oversight, and transparency of the global supply chain. They can each require a holistic assessment of operations in order to diagnose and respond to the problem. This is why an agile risk management strategy for both forms is integral—it minimizes the disruption and downtime while also improving service to customers.

APS Fulfillment, Inc. is a third party logistics supplier based in Florida that strives to help companies large and small manage their supply chains on both local and global levels. In addition to our skilled and professional services, we also offer a great deal of advice on how to manage and direct various elements of product supply and delivery solutions. For more information, view our other articles here.