Day-by-day the supply chain industry is growing by leaps and bounds! With the growing complexity in this field, it is obvious that there will be a growth in the risks involved and problems faced too. Thus, it is very crucial to be well-prepared beforehand with improved supply chain risk management and resiliency processes. Remember that risks involved may not always be negative. Sudden positive changes like unexpected increase in demand for a product can also be a risk to be encountered. This is because in case of a sudden increase in demand, the company will have to shift from its regular production processes to a much faster one until the demand reduces back to normal again. If the company is unable to increase production and satisfy the needs of its clients, it may be quite possible that they lose their customers and brand reputation too! So, for any positive or negative risks involved, supply chain risk management and resiliency are two important factors.
What are the different types of risks that can affect a supply chain?
Let us get into the details of the types of risks that can be involved in a supply chain industry. All risks can basically be divided into four categories – macro-environmental risks, extended value chain risks, operational risks and functional risks.
- Macro-environmental risks have potential effects across the entire supply chain, which include all sorts of economic, environmental, geopolitical and regulatory factors, or those that relate to infrastructure and security of the organization, or any other hazards caused.
- Extended value chain risks refer to those that originate in the company’s upstream and downstream supply chain partners from tiers involved in the suppliers’ segment to distributors and end users.
- Operational risks relate to those that may occur within the internal processes of a company that include developing, planning, sourcing, production and delivery.
- Functional risks refer to those that exist among functions that support supply chain processes. These include finance, human resources, IT development and legal functions.
How important is supply chain risk management?
To fight against all the above mentioned risks, it is very important to have a set planned course of action, which is known as supply chain risk management. Although eliminating all kinds of risk completely is unrealistic and not possible but, the better you are planned, the better you can solve these issues. Risk exists in every part of a supply chain operation and thus, it is important that risk management is infused into the entire organization from top to bottom too.
How important is resilience?
Resilience refers to the ability of a company to fight against any kind of sudden pressure/risk and get back to normal working conditions as though nothing had happened. Sudden pressures here may include positive ones like a sudden increase in customer demand or negative ones like a natural disaster. Improving on resilience does not require spending lakhs of rupees; it only requires dedication across the entire organization. For example, an organization must have each and every segment integrated together, which will improve decision-making processes by involving everyone. If one part of the supply chain does not have access to another, the organization is definitely at risk. Collaboration is highly essential with external parties too. In case of any sudden event, the organization should be able to effectively communicate with the suppliers, shippers and all others they deal with, to aid in adjustments to meet the demands of the occurrence. Jayem Logistics realizes the worth of having an integrated internal structure as well as collaboration with all its external parties, which is what makes it the best integrated supply chain player in India.
Now that you know the importance of supply chain risk management and resilience, make sure to have your organization better prepared to meet the demands of unexpected changes. You must also test the plan before a problem occurs to know if it could lead to being a successful one in case of the actual event.