Assessing supply chain risk has always been an element of undertaking full network reviews. However, taking the Covid-19 pandemic as a catalyst, businesses might want the option of considering a more specific focus on supply chain risk on its own.
Covid-19 highlighted many of the risks that had existed in many supply chains for years. It has been a salutary lesson.
Whatever, the new normal looks like post-Covid-19, businesses will need to take steps to ensure they protect future business performance. This can be achieved in two ways. First, by creating supply chain resilience and secondly, by building internal capability to manage future supply chain shocks. Your systems will be tested again so the key is being ready and absorbing the impact.
Lets’s be clear. The objective is not just to mitigate the risk but to build a competitive advantage in reacting to it effectively.
The first step on this journey is to identify and mitigate your current supply chain risks and conduct a risk assessment.
Introduction to Supply Chain Risk Assessment
Supply chain risk is one of those business concepts that has been around for many years. It has developed traction especially in automotive businesses that operate on lean logistics principles.
By their very nature, these are more fragile to supply chain shocks. However, generally, it has not really been taken seriously enough by many businesses, until of course, a catastrophe occurs.
So, maybe with the Covid-19 pandemic supply chain impacts, it is a concept whose time has finally arrived for business more generally.
Supply chain risks can arise in a variety of different forms. Risk identification can be categorised as:
- Network risks. As you already know this can be a very long list. Supplier failure, supply chain IT failure, strike in a logistics service provider are at the top of the list. Others follow in quick succession, flood or fire at a DC, and even a surge in demand that the infrastructure cannot handle.
- Organisational risks are prevalent too. Departmental failure, key individual illness, no relevant data to support decision-making, lack of information sharing and no early warning mechanisms.
- Business environment risks. Macro-level effects such as a general recession, trade disputes, loss of market to competition. The recent Brexit problems will be at the top of most people’s lists.
Obviously, when a crisis hits all 3 of these risk areas simultaneously as in the case of Covid-19 the resulting impacts are massive. Companies that consider themselves UK based and should not, they may think in theory, be affected by Brexit have had quite a shock. Although a business may be UK based quite often their suppliers are not. Ensuring your business is robust even if it has limited direct contact with other countries within the EU is an important factor.
Just one failing in the supply chain often means customers needs cannot be met.
It’s fair to say that Brexit has been an eye-opener for everyone.
Yes, even the best-laid risk assessment and contingency planning would not fully protect a business in this type of situation. However, it would mitigate some of the worst impacts. It will certainly help to get the business back up again as restrictions are eased.
We are seeing this in more and more of the companies we work for. The least prepared companies are certainly suffering the most in the post-Brexit environment.
The Foundations of Good Supply Chain Risk Assessment.
The 4 pillars of supply chain risk management that underpin best in class performance are shown below:-
So, the key questions to ask of your business are:
- Does your supply chain provide you with complete visibility? This shouldn’t just be available historically but in real-time.
- Do you understand your supply chain risks and do you have business tools to assess them?
- Have you made systematic planned actions to limit the level of supply chain risk?
- Do you have contingency plans in place in the event of a major supply chain disruption? Have they been recently reviewed and still fit for purpose?
- What other risks in the supply chain could have a negative impact on your performance and profits?
Managing Risk. Supply chain strategies that make a real difference.
We at Bisham Consulting have developed an interactive approach to carrying out supply chain risk assessments for our clients. It is based on a 4-stage process for the analysis of the risk including:
Identifying risks, through end to end mapping of the supply chain. Auditing existing operations and finding process weaknesses, compliance risks and checking existing contingency plans, where they exist.
The supply chain risk extends as far as the software and even the company website where malware and waterhole attacks are becoming increasingly common.
Assessing risks, by attributing risk indices to all elements of your supply chain. This produces a Hot Spot analysis and identifies Single Point of Failures in your supply chain.
Risk mitigation plans based on segmentation of supply chain risks. Can they be avoided or reduced through supply chain re-design? Can the risks be limited or transferred e.g. insured or must they be retained in the business but with robust contingency plans put in place?
Finally, what are the capabilities our clients need to effectively monitor supply chain risk on an ongoing basis?
Combining these four elements are the key to an effective risk management programme. They will make you more risk aware and give supply chain managers far better control.
You can see more of the services we offer here.
What are the client benefits of a risk-assessed supply chain?
With a properly risk-assessed supply chain, you will obtain a fresh and independent check of the risk levels in your organisation. Ensuring that hidden risks are revealed, known risks have been mitigated and that robust contingency plans are in place. We will also leave you with clear recommendations on how your organisation should be monitoring ongoing risks and reacting to them effectively.
We offer these services for both local and global supply chains.
Going through the process will build better resilience into your business performance. It will ensure improved business continuity. It will also give you a major competitive advantage.
Ultimately you may even get a better night’s sleep as well!
For more information give our friendly team a call today on 01628 487000.