Question

List three types of supply chain risks. Explain ways to mitigate these risks.

Answer 1

(Q) List three types of supply chain risks.Explain ways to mitigate these risks

(Ans) Supply chain risk are the risks associated with the supply chains. It may range from natural calamity in some part of the world from which organisation procures raw material for production activities to the strike of transporters due to which you can’t supply your finished goods to the market.Even the most sophisticated companies need a reminder for the different types of risk, and how to mitigate each.

Types of supply chain risks and the ways to mitigate them are as follows :-

1. Strategy Risk = Choosing the right supply management strategy.

   It means what’s right for one business might not be right for yours. For example, a small family-run business may opt to source locally because they don’t have the resources needed to keep an eye on global suppliers.

   Mitigation and Management Approach: Define the right up-front strategy, and identify and qualify the right suppliers, using reliable market intelligence to drive decisions.

2. Market Risk = Brand, compliance, financial and market exposure.

When outsourcing part production or even entire product lines, you’re putting your company at the mercy of your suppliers. If they deliver a sub-par product, or fail to deliver completely, your customer will be looking to you, not them

Mitigation and Management Approach: Pinpoint the product line’s quality standards tolerance, and determine the possible impact of a compromise. Monitor those lines closely to detect early-warnings before issues wreak havoc with your firm’s brand, ability to meet compliance regulations and the bottom line.

3. Performance Risk = Ongoing supplier quality and financial issues.

Now that you’ve selected a supplier, there’s still a lot of work to be done. Businesses are acquired, go out of business or shift strategy every day, so constant vigilance is needed.

  Mitigation and Management Approach: Continuously monitor all of your suppliers to avoid disruptions caused by bankruptcies, performance issues, ownership changes, labor strikes, geopolitical changes, etc. You may need to tap technology to effectively achieve this level of monitoring.