Every business owner wants to know the way to maximize their revenue and profitability and reduce the risks they are at. Leading companies, in the supply chain industry, have identified risks to their own supply chains and have created strong mitigation strategies to offset any negative effects.
Natural events can have a huge impact on the supply chain and this cannot always be considered when creating strategies to avoid negative effects. In the aftermath of the Japanese earthquake in 2011, there was a global part shortage – this was due to factories being destroyed. These events seriously disrupted their supply chain – leading to delays in taking products to the market. This then had a knock on effect and damaged sales and increased costs in worldwide markets.
It is not just the environment that can cause havoc with the supply chain, economic crisis, political unrest, demanding customers, technology changes, terrorism, short product lifecycles and the interest can all affect the way businesses operate across the globe.
Through utilising intelligent data from your supply chain, in combination with external market information, it is possible to advance your business’ ability to plan for the future wisely.
You first need to identify your risks:
1. Inventory Risk
Inventory risk is often the biggest risk that any business can face – it is the result of a mismatch in projections and actual market demand. Maintaining excess inventory can become a liability and can hugely affect your finances. If you fail to predict an accurate probability of internal and external triggers of disruption – you will not be predicting the future correctly.
2. Procurement Risk
A procurement risk is to include unpredictable natural events which can affect the supply chain. Natural events can create shortages of materials and products and increase prices quite dramatically.
What are your financial risks? Is your capital tied up in business investments? Or do you have slow incoming capital? If so, this will be identified as a financial risk. By making yourself aware of the security of your finances – you can be sure to have a secure financial future.
Technology Lowering the Risks
The ability of the technology available today is tremendous; business owners are able to practically foresee the future of their supply chain when entering appropriate data. Further technology in the form of analytics can also be used to feed data from their existing risk management systems into analytics and dash boarding applications. Analytical information can be used to spot key trends, patterns and potential future disruptions.