With a huge number of constantly shifting variables, suppliers, and other factors to consider, it’s easy to feel that managing supply chain risk is an unending battle that you’ll never win.
But managing and mitigating supply risk is just about having relevant and timely insights into the key factors that could disrupt your supply chain and then acting proactively or reactively on the information. Here are seven risk questions to help you get started.
1. Are we looking at risk at a supplier-specific level or across the entire value chain? Looking at either of those in isolation won’t give you a complete picture of your current risk.
If you have only a holistic view of risk across the value chain, it’s hard to understand exactly where your biggest issues lie—leaving you unable to resolve or act on them. Similarly, if you look at risk at just a supplier level, you can’t fully understand the impact that each supplier’s risk level has on your overall risk exposure, or how broadly their risk level could impact your operations.
2. Do we understand the “risk profiles” of critical categories and suppliers? Chances are your organization depends on a few key suppliers and categories more than most. When you work with these suppliers and categories every day, it’s easy to get complacent from a risk perspective.
When a supplier or category is critical to your business, it’s essential that you always understand their risk profile. That means frequently reassessing risk levels and exposure, not simply relying on what you think you know, or what you learned when you first started working with them.
3. How current and relevant are these profiles? It’s important to have a structure in place for maintaining those risk profiles, and keeping them up to date. Conduct exploratory exercises frequently, to ensure that you stay ahead of any potentially damaging shifts within your critical categories or suppliers.
4. Are we integrating both qualitative and quantitative considerations? Numbers and trends can give you a broad picture of overall risk history and potential exposure. But strong qualitative analysis must supplement those figures to surface any threats that key performance indicators and other figures can’t pick up.
5. Are we assessing trending issues and performance and avoiding snapshot perspectives that rapidly become out of date? At a time of crisis, you’ll naturally start asking big questions about supplier risk, and you’ll probably want to do some rapid reassessment. That’s valuable to help you navigate the short term, but you shouldn’t rely on those snapshots for longer periods. A risk picture based on a supplier’s exposure in July 2020 shouldn’t be relied upon for decision making in 2021 and beyond.
6. Are we working to be as predictive as possible with regards to the impact or implications of the risk parameters being investigated? It’s not enough to simply consider how exposed you may be to particular risk parameters across your supply chain. You must also carefully assess how each one could more broadly impact your operations, should the worst case become reality.
Modeling supply chain crisis events can help you better understand the knock-on impacts of the risks you’re trying to safeguard against. Then, you can start preventive action by taking charge of factors that you have complete control over, instead of hoping that key suppliers are equipped to mitigate those events themselves.
7. Is risk management integrated with our ongoing supply chain, sourcing and category management activities? Risk management is an ongoing process that must be deeply embedded in your procurement and supply chain activities. That means equipping teams with a stream of reliable insights so they can consider the impact of their everyday decisions as they make them.