Supply chain risk management is an operation that combines two processes into one: Supply Chain and Risk Management. Supply Chain Risk Management Process is a strategic process to recognize, monitor, evaluate, and reduce the risks of all companies, including shipping and logistics companies. These strategies help in managing the operational risks. It is done by the constant evaluation of the supply chain to secure continuity and profitability.
What is supply chain risk management?
Supply chain risk management can be viewed as a whole process starting from acquiring raw materials. Secondly, transforming them into finished goods. And lastly selling them across various market channels. This makes it vital for any company for the supply chain to function properly.
Supply chain risk management covers all areas of the supply chain, such as in cold chain logistics services. Also, risk can include certain disruptions, hurting the supply chain performance. Thus, effective risk assessment is crucial to decrease costs and rise the sustainability of the company in long term.
Why is it important?
There are numerous reasons supply chain risk management is crucial to any organization, such as the ones dealing in cargo transport services. So, here are some of those reasons:
- Risk management helps numerous supply best practices. Also, it would act as a key stakeholder in controlling the waste. It would save the losses that could have appeared due to the usage of wasteful resources.
- ̥Risk management strengthens the supply chain partner cooperation. As risk management would help to grow the trust, also mutual risk learning will improve.
- ̥It helps to have access to a broader look at the supply chain. It would handle the risk exposure surpassing the company’s facilities. Into the wider part of geographies and abilities.
- ̥The point of Latent Risk. It warns the company to focus on a very important area of the problem. It does so by ensuring strict monitoring of the approaching risk. And of course, planning, determining, and implementing solutions to improve the supply chain.
- Providing the company with reward in return for the risk it endures. This means proper risk management secures that risk is minimal. All the while the company gets its rewards from its people, assets, and resources.
The biggest supply chain risk
The biggest risk nowadays is for sure the Covid-19 pandemic. Therefore, it resulted in various limitations and shortages of necessities. The pandemic brought forward the drawbacks of flawed operations. Even the Big Companies recognized the value of supply chain management.
Furthermore, the extent to which it can be influenced by unsteady times is important. As many businesses had single source strategies, they weren’t ready to handle this shock very well. Lost sales and lack of risk management in logistics were issues for almost every company. Including those dealing with air cargo from USA to Saudi Arabia. This left a lot of companies weak to product shortages, supply delays, loss of demand, and high costs.
Leaders who work at the top of various companies should understand this. They should concentrate on the factors that would encourage a considerable risk management system in the supply chain. Various factors, such as managing vendor relationships, are crucial for the growth of the company and for keeping risks under control.
