In theory, reducing risks in the supply chain is essential for the success of any company. The supplier management, procurement and logistics teams should plan efficiently and productively to achieve your commercial goals. However, in practice, we face a lot of potential risks.
It is important to analyze and identify these risks to evaluate the best practices to eradicate them.
Which are the main risks in a supply chain?
Economic and financial risks
Hiring a supplier that is not financially stable or that has a lot of debt can result in a dangerous failure to comply with a commitment and may compromise the whole supply chain.
Political risks
The local macroeconomic and geopolitical situation of a company can interfere in its production and affect a supply chain.
Risks in planning
Planning for hiring a supplier and elaborating a solid contract are crucial stages to form a successful relationship. Otherwise, your operations might be affected.
Risks related to quality
It is necessary to demand and analyze international quality certifications because they guarantee the correct production and operation of the supply chain.
Legal risks
All over the market, many companies deal with legal problems. Getting involved in relations with these companies is a big risk for your production and also for your company’s reputation.
How to mitigate these risks in your company?
There are different practices you can implement to protect your business:
Use of data for event prediction
The use of data enables you learn the real financial health of a company, analyze the suppliers to identify risks, identify other companies’ trends or forecasts, etc.
A plan for risk mitigation
After a methodologic evaluation, you can decide the margin of risk you want to act on and which companies you should look into and keep track on.
Training your team
It is necessary to guarantee that all your teams are trained for risk identification. Teach and train your team or hire a specialized company to do so.
Keeping focus on the quality of the production process
It is important to identify if a supplier has a structured audit and quality control process, and if that company has a satisfaction ethic that aligns with your company’s.
A strategic supplier portfolio
Identify all the suppliers that have a bigger or lesser influence on your business. From raw materials suppliers to transporters, investigate every entity involved to mitigate risks.
We recommend you to have an efficient process of supplier integration that shows you very clearly which are the levels of risk your company is exposed to. That way you can study, plan and use relevant and updated information to mitigate said risks and build solid relationships with good suppliers.
