Even the most strategically put-together plans are bound to fail or be negatively affected due to one reason or another. These reasons can be ignored on domestic level however corporate world is in no position to leave anything on chance. The discipline which deals with such factors is known as risk management.
The risk level increases when we talk about the production sector. There are uncountable factors that can go wrong causing delay and/or production failure. Lean supply chain management and supply chain consulting ensures the optimum planning and executions of matters but the risk would always be there.
Supply chain risk management is a part of Risk Management study which attempts to indentify all possible commotions in the production process that lead to financial loses. It helps a company in overcoming the weaknesses through various approaches.
The core idea of supply chain risk management is to create a perfect integration between all the stakeholders of supply chain. The integration eliminates chances of miscommunication hence reducing failure points to a bare minimum.
The concept of integration in supply chain is known as Integrated Supply Chain Management. It focuses on providing all sub-departments within supply chain to maintain effective communication following a proper chain of command.
The ultimate expected outcome for an integrated supply chain management system is to have an immaculate inventory tracking system; which is considered the key to success. All the factors which translate into risking excess inventory must be considered.
Supply chain risk management has to be inculcated in all the areas of the supply chain. May it be supply chain planning, execution or shipping, risk has to be minimized through effective strategic planning by encompassing the supply chain risk management hypothesis.
The most effective way of doing so is always to have a contingency plan. A layman calls it “Plan B”. In the corporate world of recent times, not only should you have a Plan B, there must be a Plan C & D as well. That is the only way supply chain risk management would work.
The reason for having so many back up plans is simple; these are complicated times. Previously, companies faced less trouble for their production needs due to less competition, limited number of options and of course, better business ethics.
As the technology has advanced, globalization has changed quite a number of things in the corporate world. Supply change risk has increased manifold due to numerous opportunities, both for the supplier and the consumer.
Risks like a substandard raw material supply at your door step, disloyal labor, cancellation of order just before shipment, etc require the supply chain risk managers to leave nothing on faith or chance.
It may take one wrong decision for a company to lose millions. Ineffective supply chain risk management can spell disaster and can seriously affect the sustainability of a company. Similarly, this can be the only thing that provides it an edge over all others in the market and can mean incomprehensible growth and power.