6 ways companies should manage their supply chain risk in uncertain times
As businesses are recovering from two years of supply chain disruptions caused by the pandemic – another wave of chaos on supply chains has been unleashed. Just when you think it can’t get any worse – it does.
Russia’s unprovoked invasion of Ukraine combined with China’s latest zero-tolerance approach to preventing another escalating virus outbreak is causing businesses worldwide to experience further supply chain bottlenecks and increased pricing pressure. Disruption seems to be the new normal in global supply chains – so it is high time for businesses to implement a proper supply chain risk management strategy if they haven’t done so already.
If you don’t know where to start, don’t worry! In this blog, we will go through the key steps every business should take to get control over vulnerabilities and potential threats in their supply chain. Let’s have a look!
Supply chain disruption caused by the Russia-Ukraine Crisis
Best practices on how to manage your supply chain risks in times of uncertainty
While there is no one-size-fits-all approach on how businesses should manage their supply chain risks in times of crisis, there are some key steps all businesses can take to better build resilience and quicker identify vulnerabilities on all tiers of their supply chains. Let’s break them down:
2. Perform risk assessment across all tiers to access critical supply chain data
Many companies are settling with insights and monitoring risk assessment for their direct suppliers only. But to be frank, the most severe risks are usually hidden deep down in the supply chain, and they are usually the ones companies must keep an eye on. To properly identify and even prevent risks – achieving end-to-end visibility on Tier 2, Tier 3, and beyond is a must.
3. Understand and activate alternative sources of supply
Ever since the 1990s, businesses have been pursuing strategies, such as outsourcing and offshoring to reduce costs, retain market position and gain competitive advantage. While some businesses began to reconsider their complex, global supply chains as a result of disruptions from the financial crisis in 2008, supply chain disruptions have never been as prominent as today. A cocktail of disruptions generated by the pandemic, climate-related events and the war in Ukraine have caused businesses to reconsider their supply chain structure once again. This might be the time for you to take a deep look at your supply chain strategies: are you over-relying on one risky supplier? Or are your suppliers clustered in the same area? At times of socio-political and environmental instability, the power of understanding the weaknesses of your supply chain structure and sourcing for alternative suppliers should not be left unnoticed.
4. Prepare for disruption in operations in the conflict region
Scenario planning exercises help companies to prepare for unpredictables as it enables them to understand better potential operational implications – both financial and non-financial – of various scenarios. This is especially true in times of uncertainty since it helps businesses to truly get familiar with the ongoing crisis, its potential risks, as well as opportunities. Having various scenarios and associated risk mitigation responses identified brings more confidence in your decision-making in these strange times.
Worldfavor enables you to easily collect and detailly track your multi-tier supply risks over time. Our Sustainainable Sourcing solutionhelps you to reach new levels of transparency by uncovering vulnerabilities and building resilience.