As businesses become more and more reliant on global suppliers, the chain of custody processes (COCs) become increasingly important in risk management. It is crucial that companies understand their supply chain to ensure both safety and legal compliance when working with vendors from outside their immediate jurisdiction. Risk management for the supply chain involves proactive strategies to identify potential problems—such as disruptions in logistics services, cost rise associated with changing market conditions, recalls, or contamination—and create solutions so these issues can be quickly resolved and minimized before they result in costly mistakes or regulatory fines. In this blog post, Greg Van Wyk discusses what risk management entails for a modern organization’s ever-evolving supply chain network.
Greg Van Wyk On Risk Management For Supply Chain
Risk management for the supply chain is a critical element for businesses of all sizes, says Greg Van Wyk. Risk within the supply chain can take many forms and can arise from internal or external forces. Risk management involves effectively assessing, communicating, and responding to risk using established processes to reduce any negative impacts on the business. Risk management for the supply chain encompasses a range of activities that include identifying potential risks, developing strategies to mitigate those risks, monitoring progress toward mitigating them, and regularly evaluating results.
There are several types of risks associated with managing a supply chain. Risk factors may include disruptions in the availability of materials or parts; changes in demand; delays in shipment; losses due to theft or damage; currency fluctuations; political instability; technology failures; legal issues such as trade disputes; and environmental risks. Risk management for the supply chain requires monitoring these risk factors, assessing their potential impacts on operations, and developing strategies to address them in an effective and timely manner.
Organizations utilize a range of techniques to mitigate risk within the supply chain, says Greg Van Wyk. Risk assessment methods such as Risk-Based Thinking (RBT) help identify potential risks and prioritize actions for addressing them. Risk management systems such as Enterprise Risk Management (ERM) provide structured frameworks for managing risk across the entire organization. Additionally, organizations may utilize a range of insurance programs to protect against certain types of risks or implement processes designed to minimize losses related to theft or damage.
Data from the National Retail Federation shows that 66 percent of retailers experienced supply chain disruptions in 2020 due to the pandemic. The most common areas impacted were shipping delays (54%), out-of-stock issues (51%), and canceled orders (30%). Risk management for the supply chain is essential for minimizing this type of disruption, as organizations need to be able to anticipate risks and create strategies to mitigate them in order to protect their business operations.
An example of effective risk management for the supply chain can be seen in how Walmart responded when confronted with a global health crisis such as COVID-19. Walmart invested heavily in analytics and technology solutions which enabled them to quickly identify potential disruptions across their entire supply chain network. This allowed Walmart to proactively adjust demand forecasts and manage inventory levels accordingly while ensuring deliveries were on track. Additionally, Walmart invested heavily in digital capabilities such as contactless delivery and curbside pickup to ensure customers were getting the products they needed while also staying safe.
Greg Van Wyk’s Concluding Thoughts
Overall, Risk Management for Supply Chain is a critical element of businesses of all sizes. Risk can take many forms and arise from internal or external forces, so organizations must be prepared to assess, communicate and respond to these risks in an effective manner. According to Greg Van Wyk, risk assessment methods such as Risk-Based Thinking (RBT) help identify potential risks and prioritize actions for addressing them. Additionally, investing in technology solutions that can quickly identify disruptions across the supply chain network can help organizations proactively adjust demand forecasts and manage inventory levels accordingly — ultimately helping to minimize disruptions and protect their business operations.