Supply chain risk management not only helps to keep your supply chain protected but also keeps your company, as a whole, more risk aware.
Why is supply chain risk management important? Supply chain risk management is important because it identifies and eliminates possible risks in the supply chain that, if not found early, could create data leaks, financial loss, or compliance violations.
What Is Supply Chain Risk Management?
Supply chain risk management (SCRM) is the science and art of identifying security, logistical, and operational risks along a product or informational supply chain. It also involves addressing those risks and optimizing the movement of goods and services from the point of origin, through processing or manufacturing, and into the hands of customers and stakeholders.
Modern supply chains are incredibly complex, involving potentially dozens to hundreds of stakeholders and different interacting management and logistical systems. The wonders of modern operations and logistics are such that most chains have remained resilient, even during the COVID-19 pandemic and the current work shortage.
Supply chains are still difficult to manage due in no small part to the necessary overlap of people, organizations, technologies, and environmental factors. That is why major government agencies and enterprise companies are turning to the advanced discipline of supply chain risk management.
Risk can come from several areas:
- Financial Risks associated with loss of goods and materials, loss of data, or lack of optimization and continued waste in different parts of the chain
- Environmental Risks from lost materials, lack of access to resources, or natural destruction of capabilities due to disasters, epidemics, or climate change
- Cyber Risks due to compliance or security breaches, data silos, or lack of software interoperability
Challenges to supply chain risk management include the following:
- Transparency: Hundreds or thousands of suppliers, transporters, and other vendors could potentially contribute to the chain of a single product or service. Achieving transparency across all these players and stakeholders can be difficult.
- Complex Risk Profiles: Different technologies and tools, not to mention people, can interact in strange and unexpected ways. As such, risks associated with breakdowns, security breaches, lack of information, and so on are often tied to the interactions (or lack thereof) between different stakeholders and associated risks.
- Proprietary Tools and Approaches: There is not always a way to standardize software and other tools across third-party vendors and stakeholders. Lack of interoperability or visibility associated with different tools can silo data and operations, limit visibility, and make tracing issues across different milestones impossible.
- Environmental Risks: Problems with the environment, lack of materials, failures in technology, or issues with data storage centers can all hinder effective management—thus serving as a risk.
- Manufacturing: Breakdowns in the manufacturing process, or simple inefficiencies, can make or break a supply chain.
What Are Some Important Supply Chain Risk Strategies?
With all the challenges that managers face, and all the complex interactions that could suddenly change, the most crucial step for effective SCRM involves implementing the right tools and strategies to support optimal supply chain operations. Strategies and tools allow managers to see supply chains at a higher level and focus on addressing those risks, without sacrificing the flexibility of modern business relationships.
Some important strategies to implement for SCRM include the following:
- Use the “Prevention-Preparedness-Response-Recovery” Model: Under this model, a supply chain manager documents risk mitigation through the lens of PPRR: preventing risk through mitigation, preparing contingency plans in case of issues, responding to events with those contingency plans, and recovering normal operating capacity.
- Audit and Test Internal Supply Chain Assets: All digital and logistical systems should have regular targeted testing and audits conducted to ensure correct operations and to catch issues before they become catastrophic problems. This includes shipping and physical assets audits, penetration tests, and annual compliant security controls cataloging.
- Improve Visibility Over Supply Chain Assets: Strategize with stakeholders and partners on how to increase interoperability between systems and facilitate data sharing. Work with partners who view their supply chain data as a proprietary resource and determine if there are secure, compliant approaches to sharing data.
- Model Security, Operations, and Risk: Creating supply chain models, security measures, and operational practices makes it easier to address risk.
- Optimize With Advanced Digital Tools: Different parts of the supply chain work in different ways, but by and large, logistics, operations, shipping, and manufacturing are incredibly well-suited to automated management. Third-party artificial intelligence, machine learning, big data analytics, and autonomous systems are revolutionizing SCRM and can help offload the minutia while providing a better platform for optimization.
- Plan and Deploy Contingencies: Always have contingency plans in place for all stages of the supply chain, including how to route services, back up and restore data centers and digital systems, and decentralize applications through distributed cloud environments.
These strategies focus on the risks inherent in the supply chain, mitigating or resolving them and building approaches to maintain supply chain operations in case of emergencies. Risk management is a never-ending process.
Strengthen Supply Chain Risk Management With Powerful Data Management Capabilities
Managing a supply chain includes sharing, managing, and protecting one of the most important assets to any chain—information. This requires a platform that can facilitate transparent, secure, compliant file storage and transfers, audits, reporting, and data analytics. Sensitive content transmitted into, within, and out of an organization must have the right governance, compliance, and security elements in place.
Learn how Kiteworks strengthens SCRM by unifying, tracking, controlling, and securing sensitive content communications. Schedule a custom-tailored demo today.
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