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 involved in transforming raw materials the organization consumes into finished products or services the organization offers. It includes planning and managing sourcing, procurement, conversion, and logistics management functions.
One of the main reasons companies implement global supply chain management strategies is to boost their competitive advantage. That said, the globalization of supply chains can also increase potential risks to quality, safety, business continuity, and reputation. Those issues need attention too.
Every company, regardless of industry, is exposed to both internal and external risk factors from supply chain disruption.
Internal supply chain risks include risk events caused by:
- Disruptions of internal operations;
- Changes in management, key 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 risk events 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 disasters, such as earthquakes, hurricanes, and tornadoes.
An organization could fall victim to supply chain financial risk if something threatens financial health, such as higher component costs eating into profit margins. A company might suffer reputational risk if a supplier engages in unethical behavior, such as bribery, child labor, or anything that could reflect poorly on the company’s brand. Finally, a supplier’s social media activity can also harm your brand.
Supply Chain Risk Examples
Supply chain risk includes a wide variety of problems with vendors, suppliers, shipping agents, resellers, and other third parties. Those issues can disrupt production, operations, sales, and projects. They can also lead to quality issues, accountability, and reputational conflicts. Here are some examples that expose supply risk:
Rising prices are caused by supply, demand, currency instability, and customs tariffs. Volatility in prices can jeopardize financial projections and profitability of the business.
These can arise from lacking a component, material, or part needed to produce a finished product. Shortages may be short-term availability issues or long-term if the supplier has discontinued the required items.
If litigation or some other dispute ruptures your relationship with a supplier, the scenario will lead you to replace the supplier.
Quality failures occur when shipments of certain parts do not meet the given specifications or perform as expected.
Carrier and logistical issues can result in late deliveries, damaged packages, or lost shipments.
Sudden worldwide or industry-wide drop in supply due to events such as a pandemic, natural disaster, labor dispute, or trade embargo.
What Are Supply Chain Risk Management Strategies?
Supply chain risk management tools exist to help you track and maintain your supply chain sustainability. These tools can make order intake, shipping, ordering supplies, and taking inventory much more efficient.
As more pieces of your supply chain become cloud-based or automated, using software to manage your supply chain risk management program becomes increasingly necessary. Unfortunately, older techniques and strategies aren’t equipped to navigate the speed at which these technologies advance.
This kind of software can give you a competitive edge in a crowded market. It can centralize your workflows, improve stakeholder communication, and help protect you from risks you don’t even know to exist yet.
Some strategies are:
Use a PPRR Risk Management Template
PPRR stands for prevention, preparedness, response, and recovery. It is a globally recognized supply chain risk management strategy employed by organizations. PPPR can especially help with business continuity planning. Various templates to walk an organization through the PPPR methodology are available online.
Enhance Your Supply Chain Risk Governance
Try the following supply chain risk management strategies to reinforce your cybersecurity defenses.
- Set standards for supply chain compliance for all of your third-party suppliers;
- Define roles for users and apply security controls to narrow down who can log in to your system and what level of permissions they have, to prevent unauthorized meddling in your supply chain operations;
- Perform a thorough due diligence and risk assessment for all vendors and service providers before entering into any contract;
- Fully train all employees on cybersecurity protocols.
Systematically Monitor Risks
Investing in a scalable digital solution that automates the oversight of several aspects of your supply chain is the simplest way to monitor your risk management plans consistently. This will provide you with safety, reassurance, and precious insight into how to streamline supply chain operations.
Using too many solutions in your software ecosystem can get in the way of risk management, especially if you keep business data in many separate disparate systems.
To make it easier to harness data analytics, predictive insights, and data sharing, invest in a comprehensive solution that maintains all of your data in a well-organized, centralized, single warehouse.
What Are the Benefits of Supply Chain Risk Management Software?
Supply chain risk management software can bring many benefits to your company beyond its intended purpose.
For example, supply chain management software can help minimize ship times by allowing you to track the process from beginning to end. In addition, the metrics you can gather from these programs help your company achieve its long-term goals for product volume, customer satisfaction, and related issues.
Many supply chain software options are scalable and cover multiple functions. It’s ideal if you can centralize and streamline your processes for the entire lifecycle of your supply chain from demand to delivery.
Artificial intelligence and advanced analytics in many programs allow you to create more accurate predictions about supply availability, logistics bottlenecks, and related issues. The insights help you predict risk far in advance before it becomes a severe 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 to protect you in an emergency.
Manage Supply Chain Risk Management With ZenGRC
Instead of using spreadsheets, adopt ZenGRC’s compliance, risk management, and governance platform for your supply chain risk management activities.
It’s crucial to include your supply chain in your overall enterprise risk analysis and ensure that the tools you use to manage the different facets of your company can work in harmony. ZenGRC allows you to streamline your risk mitigation and compliance efforts from one easy-to-use program.
Vendor due diligence questionnaires are a breeze with ZenGRC. It manages distribution, collection, and aggregates responses. It will even assign a risk rating so you know where to focus your energy.
Workflow management features offer easy tracking, automated reminders, and audit trails. The ZenConnect feature enables integration with popular tools, such as Jira, ServiceNow, and Slack, ensuring seamless adoption within your enterprise.
Insightful reporting and dashboards provide visibility to gaps and high-risk areas. By better understanding your risk landscape, you can take action to protect your business from cyberattacks, avoid costly data breaches, and monitor the security posture of your vendors.
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 see how ZenGRC can improve your supply chain resilience.