The Importance Of Focusing On Risk Management Of Supply Chain
There are two primary goals because of which people start a business. The first goal is to create an innovative product or service that meets the market’s existing gap. Secondly, any company must make a profit. Without meeting the second goal, working on the first goal of any business is almost impossible. In an ideal world, creating a good product or service would have sufficed to run the business smoothly. However, we live in an imperfect world where many variables determine a business’s success.
Variables Determining Success Of A Business
The Covid-19 pandemic showed that resilience is essential for any business to service. Not only should businesses be prepared to mitigate the day-to-day hurdles but also, they should be prepared for something as big as the pandemic. Additionally, other factors that impact the success of a business are geopolitical instability and wars. Other factors that can impact the functioning of the business are political unrest, natural disasters, government rules, and leadership changes. Ninja Xpress and other logistic companies like Shopee Xpress also impact the functioning of the supply chain as they take care of the shipment, production, and supply guts.
The variables can either have a positive or negative impact on the business. Sometimes, it works in favor of the business, and sometimes, it creates a problematic situation. Furthermore, it also has a ripple effect on the company’s functioning. On top of it, the supply chain is highly complex. Therefore, it is critical to focus on the risk management of the supply chain.
The Risks In Supply Chain
The most prominent risk in the supply chain is bad debts resulting from non-payment of the different stakeholders like vendors and customers. Also, the supply of inferior goods by the supplier disrupts the entire supply chain. It is because the company either has to manage the bad product to improve it or move ahead to deliver the same inferior product to the customers. Both situations create a problem for the business. The third risk includes delayed deliveries of different components of the business. Also, there is a need to consider the volatility in commodity prices. For instance, the inflation rate is now creating heavy havoc for many businesses.
Other supply chain management issues include labor shortages, shipping delays, legal contracts, geopolitical issues, and unhedged foreign exchange exposure.
The Importance Of Focusing On Risk Management Of Supply Chain
The first thing that risk management in the supply chain takes care of is that it avoids profit erosion and is also helpful in preventing unnecessary losses. It avoids delays and disruptions in the supply chain of the business. In the long term, it gives a competitive advantage to the business. The result is that the business protects its reputation in the business world and amongst the customers. It also optimizes the management of different departments within the business.
How To Manage Risk Of Supply Chain?
To manage the supply chain risk, companies must first identify the risks that can prevail in the business. There are plenty of approaches available to determine the risk. Different businesses require different approaches to risk identification, and a suitable strategy is required. The second step after risk identification involves creating a supply-chain risk management framework. The framework should include the impact of the problem on the business if the risk materializes. Based on the issues, the companies should also include the industry’s preparedness for mitigating the risk.
Thirdly, it is essential to monitor the risk from time to time. The business world is volatile, and new risks keep emerging. Without proper monitoring, unknown risks can escape attention. Therefore, risk monitoring is vital for managing the risk of the supply chain. Whenever required, the business should also revise the preparedness of risk management. It then becomes possible to create a robust risk management structure for a business’s supply chain.
Lastly, it is critical to building a risk-aware culture in the business. Involving only the top layer of people in the risk management program is not very beneficial as it creates a loophole for the bottom layer. However, the companies can address the problem by building a risk-aware culture in the business. To create a risk-aware culture, awareness and acknowledgment amongst the employees are required. Other important factors are transparency and responsiveness.
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