Individual corporations and firms have been aware of the need for contingency planning and risk management for a long time.
Due to demanding customers and competitive pressures, businesses today are restructuring themselves domestically, as well as operating on a global basis to take advantage of the international product, factor, and capital markets. There are several concerns involving the supply chain, including economic, political, logistical, competitive, and environmental.
The implementation of strategies to manage every day and exceptional risks and challenges across the supply chain is imperative for continuity for all businesses. Here are some examples of risk management that will mitigate risk and ensure effective supply chain management.
The PPRR model is an approach to risk management. It assists businesses to construct a risk management plan. The steps to follow are:
- Prevention: Take actions to reduce or eliminate the likelihood or effects of an incident. Prepare a risk management plan that identifies the risks to your business, analyses and evaluates the impact of each risk, and prioritise which are the risks that post the most likely and most significant impact.
- Preparedness: Take steps before an incident to ensure effective response and recovery. Conduct a business impact analysis. This should consider the critical business activities that are key to survival.
Factors to take note of are:
- Everyday records and documents
- The resources and equipment you need to operate
- The access you need to your premises
- The skills and knowledge your staff have that you need to run your business
- External stakeholders
- Any legal obligations you are required to meet
- The impact of ceasing to perform critical business activities
- How long your business can survive without performing these activities.
- Response: Contain, control, or minimise the impacts of an incident. An incident response plan should be conceived. This plan should include:
Plan activation details, including a clear statement of the circumstances when the plan will be activated and who is authorised to do so.
- Incident response team details, including key roles and responsibilities.
- Evacuation procedures for your premises.
- A communication plan, including key communication methods and timings needed to keep everyone safe
- Contact lists for all the people you will need to communicate with during a crisis, including staff and emergency services, as well as different businesses involved in the supply chain.
- An event log to record information, decisions, and actions that you take during a crisis. This will be used to reassess and update plans for future crises.
- Recovery: Take steps to minimise disruption and recovery times. Developing a recovery plan, that involves recovery strategies, staff and resource requirements needed for recovery, time scales for recovery processes, and a checklist you can use after a crisis has passed and it is safe to return to your premises.
By implementing this model, external incidents will be anticipated, and damage will be limited, decreasing the time that supply chains will return to optimum efficiency. Regular testing is vital because it ensures that the model is up-to-date and fit for purpose.
Prepare your digital supply chain risk management
Digital technologies play a vital role for many businesses and their supply chains. For those that haven’t already, it is recommended that their supply chain becomes digitally integrated. However, there are risks with digitally integrated supply chains, such as malware and hacking. By improving cyber security, by establishing compliance standards for all 3rd party vendors, performing risk assessments on said vendors, implementing data stewardship standards, as well as introducing a back-up policy, the business and its supply chain limits digital risks imposed onto them.
Improve Supply Chain Visibility
Improving visibility of suppliers’ stability will increase the quantities of data and information about all parts of your supply chain. This is beneficial because it increases your understanding of your supply chain and any issues that may arise. Digitising your supply chain will improve visibility, so it is recommended that you do so.
Environmental Risk Management
Environmental risk management has never been so important universally, thanks to the pandemic – supply chains and manufacturing have been affected globally like never before. Here are a few changes that can be made to mitigate environmental risk:
- Multisource – by having multiple suppliers, you reduce the severity of potential impacts due to environmental factors.
Regularly stress test to identify weaknesses in the supply chain.
- Nearshore – find suppliers close to the centre of operations. This will reduce cycle and delivery times.
Stockpile during periods that are known to be high risk.
Implement Logistical Contingency Plans
Keeping these three things in mind when implementing a logistical contingency plan:
- Create flexibility in an omnichannel distribution strategy.
- Assess sourcing off-shore, near-shoring, and domestically sourced.
- Introduce a trade compliance programme for manufacturers, tariffs, and products.
- Diversify carrier and logistics services provider bases.
- Redundancy of distribution, transportation, and technology infrastructure.
By introducing this contingency plan, risk influence on logistics will be limited.
Risk Awareness Training
Training is costly, in time and money. If your organisation has the budget and the time to allocate risk awareness training, then it is recommended that risk awareness training is undertaken. Employees should be informed of risks to the supply chain, best practices should these risks take place, and taught how to improve their cybersecurity and the best safety practices on the internet.
Regularly Monitor Risk
Consistently monitoring supply chain risk factors is key to protecting your operations. Many organisations assume that they’re secure once they’ve implemented a supply chain risk mitigation framework, but this does not factor in new or changing risks. For example, it is unlikely before the pandemic that organisations had virus procedures in place unless operating with food and drink. Regular risk monitoring prepares and improves risk management, so all businesses should undertake it.
Businesses today are always looking for ways to mitigate the risks in their supply chain. One way to do this is by using a rebate management tool like e-bate. Our intelligent rebate management solution can help businesses track and manage rebate payments, which can help reduce the risk of missed payments or late shipments. In addition, rebate management tools can also help with b2b transactions by streamlining the rebate process and reducing the chances of errors. Get in touch with the e-bate team today by clicking here and we’ll get back to you with a solution that’s best for your business, whatever it is you do.