Of course, there is no single product that looks at every possible risk in the five categories PWC references, but there are purposely-built software solutions that help with specific risks, such as those associated with shipping and logistics. But how does a company know, for instance, if a predicted hurricane path will delay a shipment or damage freight? Is it possible to have more confidence about risks when you only know something is a risk? Predictive Intelligence to Manage Riskīecause of so much supply chain uncertainty, companies are looking to intelligent software to make risk predictions more automated and accurate. For instance, not all risks require an emergent response. Understanding the probability and severity of identified risks is key to utilizing resources in the right way. Whether risks are predictable or not, supply chain stakeholders must be able to have insight into their own risks first and foremost, as well as speed response to those risks. Finally, it says proprietary data restrictions impede progress. Also, the scope and scale of risk is challenging because companies struggle to understand the probability and severity of many risks. McKinsey says, “The private sector continues to seek a uniform and proven methodology for assessing and monitoring risk in a way that truly minimizes business disruptions.” They note three main culprits, including supply-base transparency being near impossible to achieve, particularly because so many suppliers are involved in every product. How do you know if your suppliers are conducting their own supplier risk assessments? One hiccup above stream can greatly impact your ability to deliver your products to your end customer. Even if you have only a handful of direct suppliers to manage, your risk remains high because your suppliers rely on other suppliers that add risk to the mix. Every supplier has its own supplier network. Supplier risk assessment has never been simple because it is such a complex web of relationships. ![]() PWC says of supplier risk assessment and management, “It’s not about playing defense – it’s also about playing offense – finding competitive advantage by shaping supply chain resilience strategy focused on disruption avoidance.” Developing this kind of supply chain is a continual endeavor, requiring constant monitoring, communication, and analyzing. These are just a few of the possible supply chain risks, highlighting the challenge to continually monitor suppliers. Strategic (reputational/brand, compliance, market changes, etc.).Continuity (natural hazards, poor management, supplier financial failure, etc.).Operational (quality standards, logistics, delivery performance and lead times, etc.).Financial (raw materials prices, accuracy of billing, labor costs, etc.).Social, ethical & environmental (health and safety, waste, ethical practices, etc.).PWC divides supply chain risks into five categories: The supply chain is highly interconnected, and unless a supplier has the systems and processes in place to mitigate risks before they cause disruption, you will be feeling the consequences at some point. There are dozens of risks in the supply chain and any one of them can spell disaster for your suppliers and your company. The last thing you want is to be forced to stay with a supplier that poses severe risk to your business only because you lack another supplier to take their place. As many companies can attest, having a diverse supply chain allows for greater adaptability should you decide to sever a supplier relationship. Of course, some assessments result in a company having to let a supplier go because they pose too great of a risk and there is no manageable way to lower that risk. The point of supplier risk assessments is not to weed out suppliers that pose any risk it is to compare suppliers’ risks with your company’s risk thresholds to determine whether the suppliers are meeting expectations within an acceptable level of risk. ![]() We learned that the hard way with COVID-19. Every company has its vulnerabilities, both internal and external, and not everything is predictable. There is no such thing as no risk when it comes to suppliers. Your suppliers are the key to your success, but how do you make sure they are the best suppliers you could be partnering with? What kind of risk do they bring to the relationship and is it manageable or could it prevent you from meeting your business commitments? Is your supply chain resilient enough to withstand major or even minor risks? How are you performing as a supplier?Ī supplier risk assessment is a routine practice companies conduct to better understand their suppliers, the risks they may pose, and how the suppliers address those risks. Supplier Risk Assessment – What Are You Looking for?
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