It is hard to overestimate the importance of supply chains in the modern world. The global economy pretty much depends on its smoothness and uninterrupted flow. Rapid expansion is the name of the game right now, and the faster you can move materials, resources, tools, and products around, the higher your chances of success are.
As with any system with a lot of interconnected components, supply chains can be extremely vulnerable to a large number of factors. They can vary from simple schedule problems and untimely deliveries to global disasters that change the very economic landscape these chains are built upon.
In this article, we’re going to take a look at the main types of supply chain risks. If you want to explore the variety of solutions for supply chain problems, particularly for dealing with supply chain risks, check out this website.
The problems that generate these internal and external risks sometimes might not have any distinct solution for them, however, it is still important to understand them.
The global business environment tends to be quite harsh. To triumph and get to the top of the business world, enterprises must employ almost any measures at their disposal. Some of these measures aim to achieve workflow perfection and increase brand recognition, while some are more sinister. In pursuit of gaining a business advantage by any means, some of your competitors may get down to bribing officials to harm your supply chain or even consider industrial sabotage.
However, because the business legislation can be extremely tangled and self-contradictory, your competitors may not even need to go beyond the law: a cunning lawyer can find holes in regulations, tiny enough for you not to notice them, but wide enough to suck away your whole business.
Turning to your local manufacturers to purchase parts or details for your business is highly advantageous, compared to importing them from far away. However, this strategy is not all that viable when applied to purchasing raw materials. You simply cannot switch to purchasing lead or oil from your local manufacturer, because these resources are territory-dependent.
This leads to certain vulnerabilities at the very beginning of any full-cycle supply chain. There are only so many places where you can order your raw materials, and usually, these providers tend to supply multiple businesses at once.
This situation can create product bottlenecks. It is enough for a single component to become short, and the whole supply chain breaks apart.
To avoid this, it would be wise to diversify your raw material suppliers, where possible, so that your supply chain doesn’t become hopelessly stuck in case of shortages.
This issue is really important for medicine- and pharmaceutical-affiliated businesses. For obvious reasons, control over the quality of products in this field is much higher than elsewhere, and it seems that it only gets more strict with time. In 2018, the US FDA (United States Food and Drug Administration) requested twice as many recalls as in 2017, and this number has only grownsince then.
While the healthcare field becomes increasingly important and complex, the standards of quality will inadvertently rise, and any enterprise that wishes the final stages of its supply chains to successfully function has to comply.
The global climate is changing at an alarming rate. Years become warmer and warmer, and it leads to a whole multitude of problems for supply risk management. Besides obvious transportation problems, associated with worsened weather conditions, such as the intensity of rainfalls and storms, droughts, and wildfires, climate change also influences such vital steps of many supply chains as water supply.
Worldwide changes in water levels also damage inland waterway shipping in some areas and make other areas susceptible to floods, which is never good for supply chains.
World governments try to address the problem of climate change, however, there is no evidence at this point to believe that the situation will change anytime soon. This process, however, leads to another problem.
As the world gets deeper and deeper into the climate change crisis, it is usually large companies that take the largest toll from tougher laws. One of the most prominent examples here is China, where booming industry created a lot of controversy during recent decades. The Chinese government is currently introducing more strict laws aimed to reduce emissions from many industrial enterprises in the country. It seems that the most basic material production industries are hit the hardest, such as steel, cement, and aluminum production.
This trend is very likely to become popular in other developed countries as well because the population demands higher living standards. To comply with these regulations, supply chain management around the globe has to set their chains with precision and careful attention.
A lot of industries (and all of the big ones without exception) depend heavily on international transportation. Therefore, when the political situation in one or several countries involved in a supply chain gets unstable, it always damages the supply chain a lot. Transportation companies get out of business, raw resource suppliers get nationalized, and parts manufacturers declare bankruptcy.
The only way to prevent your supply chain from falling apart due to political instability is a good supply chain risk assessment team and anticipate any crucial events in advance.
The field of risks and risk mitigation in supply chain management is anything but stable and predictable. Risks evolve constantly, and the best strategy to stay in the game is to evolve along. Spend enough time on research, and get your crisis plans together for most possible events and it should be enough to keep you going. Being flexible can mean the difference between prospering and going bankrupt in this case.