Supply chain risk management (SCRM) is the process of identifying, assessing, and mitigating the risks of an organization’s supply chain. Implementing global supply chain risk management strategies can help an enterprise operate more efficiently, reduce costs, and enhance customer service.
Supply chain management refers to how organizations manage the flow of their goods, including all the processes that are involved in transforming raw materials the organization consumes into finished products or services the organization offers. It includes the planning and management of the activities around sourcing, procurement, and conversion, as well as logistics management functions.
One of the main reasons companies implement global supply chain management strategies is to boost their competitive advantage. The benefits of extending supply chains, however, can increase the risk of quality, safety, business continuity, reputation, and more.
Every company regardless of industry is exposed to internal and external risks from supply chain disruption.
Internal supply chain risks include those caused by:
- Disruptions of internal operations
- Changes in key management, personnel, and business processes
- Not putting contingencies in place in case something goes wrong
- Not implementing proper cybersecurity policies and controls to protect against cyber attacks and data breaches
- Not complying with environmental regulations or labor laws
- Not having the goods to meet customers’ needs.
External supply chain risks include those caused by:
- Unpredictable or misunderstood customer demand
- Interruptions to the flow of products, including raw materials, parts, and finished goods
- Social, governmental, and economic factors, including the threat of terrorism
- Supplier risk management, including concerns related to a supplier’s physical facility and regulatory compliance
- Natural disaster, including earthquakes, hurricanes, and tornados
An organization could also fall victim to supply chain financial risk if something happens that threatens the financial health of a supplier, such as bankruptcy. In addition, a company might suffer reputational risk if a supplier engages in unethical behavior, such as bribery, child labor, or anything that could reflect badly on the company’s brand. A supplier’s social media presence can also harm your own brand.
The mitigation of these risks is crucial, and many businesses manage this problem by diversifying their suppliers.
What are supply chain risk management tools?
Supply chain risk management tools exist to help you track and control your supply chain. These tools can make order intake, shipping, ordering supplies, and taking inventory much more efficient.
As more steps in your supply chain become cloud-based or automated, using software to manage your supply chain risk management program becomes increasingly necessary. Older techniques and strategies simply aren’t equipped to navigate the speed at which these technologies advance.
Using this kind of software can give you a competitive edge in a crowded market. It can centralize your workflows, make your organization more efficient, and help protect you from risks that you don’t even know exist yet.
What are the benefits of supply chain risk management software?
Supply chain risk management software can have incredible benefits for your company beyond its intended purpose. Amazon’s lightning-fast shipping time has put pressure on retailers to offer faster shipping, and supply chain management software can help minimize ship times by allowing you to track the process from beginning to end. The metrics you can gather from these programs help your company achieve its long-term goals.
Many supply chain software options can cover multiple concerns or are compatible with one another. This functionality allows you to centralize and streamline your processes rather than use individual tools for the full lifecycle of your supply chain.
The artificial intelligence and advanced analytics in many of these programs allow you to create more accurate predictions about supply availability, logistics bottlenecks, and related issues. The insights can let you predict risk far in advance, before it becomes a serious threat. The ability to integrate real-time data into your strategy also allows you to track changes in weather, infrastructure, and other concerns that could affect your supply chain. The more information you have, the greater your ability to create contingency plans that will protect you in case of emergency.
Can GRC software manage my supply chain risk management program?
Yes it can, because GRC software empowers a strong approach to enterprise risk management overall — and supply chain risk is one of the threats within that broader ERM umbrella. It’s crucial to include your supply chain in your overall enterprise risk analysis, and to make sure that the tools you use to manage the different facets of your company can work in harmony.
If you’re frustrated with your current risk management program, ZenGRC can help. This platform allows you to streamline your risk mitigation and compliance efforts from one easy-to-use program. ZenGRC can help you create an enterprise risk management program that works for you, so you can get out of the spreadsheets and back to your company’s goals. Schedule a demo to learn more about what ZenGRC can do for you!