“Longer shipping routes, more regulations, and uncertain geopolitical factors increase the probability of disruptions in the supply chain. Natural disasters in Japan resulted in a shortage of auto parts, which reduced the volume of cars produced in the U.S. and elsewhere. Because of inadequate planning, auto manufacturers realized substantial losses. Companies are recognizing the need develop more effective risk strategies,”
Risk mitigation strategies include:
Integrate risk management into your business processes. Supplier risk management is an important part of the company’s strategic plan to mitigate internal and external risks. Assess all materials and their impact on your business. Include multiple contingency plans and a crisis management team trained to implement these plans. The strategic plan must be documented and understood throughout the company to ensure business objectives are achieved.
Understand key suppliers. Perform a comprehensive review of your supplier’s organization. Look at key performance indicators including on-time delivery and order responsiveness. Review their financial reports, regulatory compliance records, and quality assurance issues. Risk managers should make sure their disaster recovery plans are adequate. Closely monitor suppliers for early signs of problems.
Dual sourcing. Purchase your materials from multiple suppliers, preferably from different geographic locations, to minimize disruptions. It may be necessary to employ more quality control engineers to manage additional suppliers.
Store additional inventory. Although storage costs increase, it may be advantageous to keep extra inventory on hand. If you anticipate a considerable loss in sales due to a supply shortage, you should consider this option.
Produce critical parts in-house. Manufacturers should consider the feasibility of producing parts in the event of a disruption.
Continually re-assess your plan. Regulations, financial markets and business alliances are constantly changing. If you fail to re-assess, you may not be prepared for the next disruption and your losses could be substantial.
As part of a comprehensive risk management plan, companies should focus on the long-term viability of suppliers to help ensure a continuous supply of goods to the consumer.
For over sixteen years, QC Software has delivered the results that help companies succeed. Their leading-edge software solutions provide the flexibility, visibility and control across warehouse operations that customers need to optimize resources and profitability. Through industry collaboration, customized training, and 24/7 support, QC Software ensures that each customer is fully leveraging their technology. In addition, QC Software helps customers develop a strategic focus to better manage new opportunities and future demands.