Identifying supply chain risks

You can limit the impact of supply chain disruptions by identifying the risks within your supply chain and developing ways to mitigate them. You should document this process in a risk management plan, which is part of your overall business continuity plan.
There are 2 main types of risk to include in your risk management plan:

external risks – those that are outside of your control
internal risks – those that are within your control

External supply chain risks
External risks can be driven by events either upstream or downstream in the supply chain.

There are 5 main types of external risks:
Demand risks – caused by unpredictable or misunderstood customer or end-customer demand
Supply risks – caused by any interruptions to the flow of product, whether raw material or parts, within your supply chain
Environmental risks – from outside the supply chain; usually related to economic, social, governmental, and climate factors, including the threat of terrorism
Business risks – caused by factors such as a supplier’s financial or management stability, or purchase and sale of supplier companies
Physical plant risks – caused by the condition of a supplier’s physical facility and regulatory compliance.

Internal supply chain risks
Internal risks provide better opportunities for mitigation because they are within your business’s control. There are 5 main types of internal risks:
Manufacturing risks – caused by disruptions of internal operations or processes
Business risks – caused by changes in key personnel, management, reporting structures or business processes, such as the way purchasers communicate to suppliers and customers
Planning and control risks – caused by inadequate assessment and planning, which amount to ineffective management
Mitigation and contingency risks – caused by not putting contingencies (or alternative solutions) in place in case something goes wrong
Cultural risks – caused by a business’s cultural tendency to hide or delay negative information. Such businesses are generally slower to react when impacted by unexpected events.

(Visited 77 times, 1 visits today)
Share this:

Written by