Why You Should Analyze Your Supply Chain Risk Management

As we kick off 2015, the new year brings many things, including new resolutions, goals, dreams, aspirations, and in my case, cold winter weather and snow.

For the new year, I have been thinking about supply chain goals for 2015. What goals will take your supply chain to the next level in 2015? Is it material cost savings? Possibly improving on time delivery, or reducing the amount of bad material arriving at receiving inspection? Do you have a goal to reduce your supply chain risk in 2015, and if you do, how do you define, measure and analyze it?

In today's blog, I will briefly discuss supply chain risk and why it's important to review on an annual basis. With the beginning of a new year, why not take some time in the month of January to understand how supply chain risks effect your overall supply chain management strategy and goals.

Thinking about 3 key areas; price, delivery, and quality, you can quickly begin to build a risk matrix.  First, consider your supply chain and what risk factors you have for pricing. Who are your key suppliers and do you currently have long term supply and pricing agreements in place to protect you from price fluctuations? How are current commodity markets trending, flat, up, or down? Analyzing where your suppliers are located can also be a helpful tool in understanding what risks are present in your supply chain. It is important to know what political and economic factors effect your suppliers. Are there issues with your inbound and outbound logistics suppliers, do you have pricing contracts in place and how does the port slowdowns affect your logistics pricing.

If you continue this methodology for delivery and quality, you quickly begin to see how all three areas are inter related and how much potential risk is intermingled in your supply chain. Now take a step back and think about your supply chain management strategy and goals for 2015. Are you addressing these risks? Did you even know you had risks or fully understand how they can affect your business?

It is not feasible to eliminate all risk, but you can certainly identify and analyze supply chain risk. If you understand the risks, it will help you make sourcing decisions going forward. You can begin to make better decisions about where to buy, how much to buy, and what suppliers should be strategic partners. Do you have key product channels with too much supply chain risk and how could this potentially impact revenue for your company? Why not start off the new year on the right foot by analyzing and reducing your supply chain risk.

Please feel free to contact me if you would like more information about supply chain management.

Best regards,

T. W. Penick