Introduction
“Supply chain management” entails the coordination of various components and processes. Ultimately, the coordination necessitates a smooth flow of goods and services from one point to another. It is also imperative to note that the supply chain encompasses assessing problems and solving them to mitigate all forms of risks within the “supply sources” and their “potential risk areas.” Consequently, risks are mitigated within areas of suppliers, physical locations, and third-party dependencies. When the supply chain is handled well, the supply chain integrates with an organization’s overall “risk management strategies,” thus preventing the overall risks. Risk management within the supply chain has a key impact on a firm’s risks and security state. This is particularly because the supply chain has been digitized, and attacks have become rampant. This piece targets business people, particularly those in the supply chain, to understand the importance of managing risks and the strategies they can use to ensure the continuity of business.
What is Supply Chain Risk Management?
“Supply chain risk management (SCRM)” is the process by which an organization or company takes key steps in identifying, assessing, and mitigating all forms of risks in its business. It is also imperative to note that the risks must be mitigated in the “end-to-end supply chain.” In addition, it is noteworthy that a supply chain encompasses all the “raw materials and processes” in which a product is developed, distributed, and availed; a slight disruption can impact business adversely. Importantly, SCRM implements processes and undertakings after evaluating aspects like “daily and edge case risks along with supply chain.” The ultimate goal is usually to reduce an organization’s “vulnerabilities and promote business continuity. (Vicente, 2023, Para. 3)” Today, the business world has experienced a proliferation of “cyber attacks, particularly on the supply chain.” As a result, the value of SCRM has created a greater emphasis on “cyber supply chain risk management.” The “National Institute of Standards and Technology (NIST)” offered an updated guidance in May 2022 that focused on developing “cyber supply chain resilience.” Therefore, “cyber supply chain risk management” forms a vital aspect of the main SCRM model. For this reason, it should be integrated into a company’s “risk management strategy.”
The Importance of Supply Chain Risk Management
Effective supply chain management is vital for businesses. Overall, SCRM focuses on establishing efficiencies, reducing costs, and managing vulnerabilities within an organization. If implemented properly, SCRM works to foster the “most streamed and less costly supply chain process for businesses” and within “tolerance risk levels.” For this reason, performing a critical risk assessment is important. This is because today’s supply chain has become a “just-in-time” operation, and thus, any stoppage within the process can amount to huge losses. Subsequently, the cost can be great, particularly in terms of costing a business money and time. Unfortunately, there has been little progress in addressing risks within the area. For example, “a 2010 survey” showed that “71% of 639 executives indicated that their companies’ supply chains were more at risk (Bailey & Barriball 2019, Para. 4). Another “2022 State of Supply Chain Management” on Forbes found 70% of respondents expressed economic instabilities due to poor supply chain performance (Nobel, 2022, Para. 3). Consequently, there has been a need to improve risk management in various businesses.
Effective Risk Management Strategies within the Supply Chain
A “risk management framework” represents one of the key strategies in SCRM. The framework focuses on establishing risks, evaluating their impacts, devising mitigation techniques, and analyzing the measures consistently. The model has been effective in fostering the desired safety and being prepared for unforeseeable disruptions within the supply chain. The second major and beneficial approach is based on cultivating a risk culture. This strategy promotes a “risk-awareness” culture in a company. As a result, all the stakeholders, including employees, clients, and other junior staff, are aware of the value of risk management. Thirdly, improving the supply chain visibility represents another vital strategy. Under this approach, all the key stakeholders can view all the operations, transactions, and movements within the supply chain process. However, it is also imperative to note that this strategy leverages technologies like “IoT, AI, blockchain, and other applications that offer real-time information.”
Conclusion
Conclusively, businesses do not operate in a void. Businesses entail a myriad of operations and processes that ensure a product or service comes from the developer to the consumer. Supply chain management is one of the components that facilitates such goals. Therefore, managing risks within the supply chain is vital for businesses to operate effectively and efficiently. Notably, there have been challenges managing risks within the supply chain, particularly in the age of technology. Nonetheless, strategies such as “risk management frameworks” help combat a myriad of risks affecting businesses’ supply chains. Also, nurturing a risk-conscious culture is another important strategy for managing risks. If managed well, the supply chain ensures business continuity and minimal disruptions within an organization.
References
Vicente, V. (2023). Supply Chain Risk Management: Best Practices: Audit Board. Retrieved https://www.auditboard.com/blog/supply-chain-risk-management-best-practices/
Bailey, T. & Barriball, E. (2019). A practical approach to supply-chain risk management: McKinsey & Company. Retrieved https://www.mckinsey.com/capabilities/operations/our-insights/a-practical-approach-to-supply-chain-risk-management
Nobel, J., P. (2022). The State Of Supply Chain Management: Forbes. Retrieved https://www.forbes.com/sites/paulnoble/2022/12/13/the-state-of-supply-chain-management/?sh=3b5b351943e5
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