Any action—or lack thereof—can cause a business to go out of business in this time of bleak future prospects. For instance, more than 41% businesses shut their doors when the coronavirus outbreak began in Canada.

Naturally, each company has its own difficulties and risks because it caters to a particular market. Nonetheless, many institutions struggle with managing supply chain risks.

It is a procedure that involves controlling a network of connected enterprises that may manage anything from the movement of equipment to data and finances, making it incredibly complex and potentially risky.

In order to ensure that your organization can take safeguards, we will discuss the key supply chain risks in this article as well as how to measure supply chain performance.

Read also: How to Innovate Your Supply Chain Management: What You Need to Know

 

What are the main supply chain risks?

There are many risks in the supply chain because it is a complicated operation. Principally, these are:

• Economic risks
• Geographic risks
• Planning risks
• Competition risks
• Sustainability risks

Continue reading to learn more about how each of these risks can impact the future of your business.

 

Economic risks

Let’s begin with one of the supply chain hazards that businesses are most aware of and concerned about. Economic risks are the key supply chain concern, and they can be quite harmful due to circumstances that are beyond of your control.

But, that does not imply that you are helpless in the face of this issue. It is feasible to lessen detrimental effects like tax rises, inflation, currency rate changes, and even the bankruptcy of suppliers or customers with a strong working capital reserve.

 

Geographic risks

The risks in this kind of scenario are associated with adversities brought on by climatic elements like storms, floods, or windstorms. In this kind of situation, your business may experience issues with the actual area where it operates, as well as with deliveries and product output.

Of course, it is impossible to totally eliminate this kind of risk. But working with suppliers and consumers in several markets and locales is one approach to try to reduce this risk.

 

Planning risks

Be careful because this risk is one of the easiest for your business to avoid because it merely calls for better action planning.

Your business should refrain from making decisions before it has properly planned in order to reduce the risks in this scenario. Nothing should be done without careful consideration, including selecting a new supplier, making a significant transaction, and releasing a new product.

Market research and supplier approval are two more strategies that can be used. It is possible to demonstrate through homologation that a potential supplier complies with the set compliances so you may feel more secure and confident in the cooperation.

Nowadays, a number of technologies allow for the automation of this procedure. Using it, it is possible to boost public consultations’ confidence and security and the issue of business certifications while preventing mistakes and fraud.

In addition, through an intelligent analysis of shared private information and documents, your company is able to mitigate risks and improve qualification routines.

 

Competition risks

You will have competitors, regardless of the sector your company operates in. How do you address one of the major supply chain risks when there will always be other individuals working on services or goods that are comparable to yours?

Constantly keep an eye on what your rivals are doing and the outcomes they are getting, but don’t try to outdo them; stick to your plan. In aiming to better your management and accomplish your objectives, remember that no one can be the greatest at everything.

Sustainability risks

Although they may appear far off, supply chain sustainability risks are actually receiving more and more attention globally.

The moment has come to reassess your approach in order to avoid retaliation from regulatory bodies that could harm your firm, especially if the procedures and materials employed by your company run counter to this notion and do not even attempt to make up for CO2 emissions in the environment.

Environmentally conscious businesses not only benefit the world but also gain better consumer perception and possibly even income. Also, certified procedures can provide carbon credits that you can trade on the global market.

You can promote the following initiatives to promote sustainability in the supply chain:

• Saving and reusing water
• Recycling programs
• Reuse of discarded raw materials
• Conscientious use of electricity and natural resources
• Proper disposal of sewage and other waste
• Implementation of educational projects on the preservation of the environment

 

What is the importance of carrying out a performance measurement in the supply chain?

Due to the complexity of supply chains, failure risks exist and shouldn’t be disregarded. Management’s purpose is to stop this from happening or, at the very least, to lessen the risks that could occur.

It should be used to measure supply chain performance, which also aids in streamlining operations in relation to product transit and inventory management. This assessment helps supplier due diligence procedures in a favorable way by guaranteeing the delivery of differentiated items at a cheaper cost and under predetermined terms.

Additional benefits of effective risk management for your business may include:

• Guarantee sales
• Maintain customer satisfaction
• Meet regulatory and compliance requirements
• Preserve a good image

Put our advice into practice to observe continual progress in your company’s dynamism and competitiveness now that you are fully aware of supply chain risks and the methods your organization may avoid them.