Risk Mitigation Strategies You Need to Implement
Recent global events have made it more evident than ever that better supply chain risk mitigation strategies are much needed for many businesses. From global pandemics to natural disasters and political upheavels, disruptions to the supply chain has become somewhat the norm.
The COVID-19 pandemic has shown us that companies need to implement stronger risk mitigation strategies to prepare for any future disruptions. All areas of potential concern should be carefully analyzed; logistical, medical, cultural, competitive, economic, and infrastructure, among others.
By focusing on key areas and taking into account the fragility of global supply chains illuminated by the impact of the COVID-19 pandemic, companies can better prepare themselves to weather the future storms of supply chain disruption and control risks a bit more. Of course, sometimes it takes a bit more than preparation, sometimes you need to leverage the power of a professional partnership with a 3PL and the tech solutions and tools they can offer.
Assess Current Risk Factors and Prioritize
Reviewing your business and critically assessing potential areas with high risk exposure is the first and most critical step in risk management. Equally important is being realistic about which areas can reasonably be prepared for. Prioritize potential risks by how likely they are to actually occur, and prepare for those that are the most likely to occur.
The highest impact risk situations should have the most attention paid to them and assure that multiple contingency plans are in place. Evaluation and identification of potential supply chain disruptions allow you and your business to layout where to start.
Diversify Sources and Suppliers
While building relationships with suppliers and researching where you get the most value and lowest cost sources for your materials and products, be sure to include sources in a wide range of regions. Having secondary sources already lined up in the event of an issue in one region keeps the supply chain you rely on flexible and responsive.
Be sure to maintain relationships and stay abreast of any changes in product lines or source material availability. Remember, while lower-cost options in other countries may appear more desirable, the inability to ship or receive goods in a timely manner creates vulnerabilities in your supply chain.
Know the Suppliers You Work With
One key way to minimize risks to your supply chain is to be knowledgeable about all vital aspects of your suppliers. After all, these are your business partners, so it is important to know not only their prices and reliability, but the risks they face as well, the impact they may have on your reputation, and their financial stability. Be aware of the critical information, such as ethical compromises, source, and human rights issues, environmental issues, long-term financial viability, and so on.
It’s also important to know what kind of environment they are working in- political climate, country risks, regulations and demand compliance, and any economic issues that can have an impact on their ability to conduct business. Seek alternatives to suppliers that present too many potential compromises, and avoid being left in the lurch.
Practice Collaboration and Transparency
Having open lines of communication for each component of your supply chain can keep small snags from developing into larger ones. Include your various partners- from suppliers to carriers and everything in between, in the risk planning process. Ensure that all partners in the supply chain are aware of procedures and contingency plans. Assuring that everyone has an alignment on disaster recovery and continuity, taking cues from one another, and collaborating can make all the difference.
Sharing information about fluctuations in sales projections, economic or regulation changes, design upgrades or implementation of new software and products can also affect the flow for everyone involved. Keeping partners in the loop strengthens relationships and allows for better responsiveness in the event of disruptions, better problem solving, and reduces negative impacts.
Take Inventory of Insurance Options and Coverage Plans
Risk mitigation and preparedness is the primary function of insurance, and assuring that your business has all policies it needs to handle the fallout when risks could not be prevented is vital. While carrier liability is standard, it is not the same as cargo insurance- an important protection to purchase. Cargo insurance policies can protect in-transit shipments and warehoused goods against damage or loss, no matter their location or carrier.
Having a comprehensive cargo insurance policy will protect one aspect of your business, but another important risk mitigation insurance policy is trade credit insurance. Trade protection insurance keeps your bottom line from being negatively impacted when customers default on or delay payment.
While most businesses are aware of the coverage and insurance needs of their own company, they are not aware of the insurance statuses of their many supply chain partners. After assessing the insurance policies and needs of your business, ensure that all of your suppliers have the insurance they need as well.
By implementing these strategies and continuing to review and assess risk scenarios, preparing for supply chain disruptions, identifying any changes and fluctuations, and keeping your partners in the loop, you’ll minimize risks to your business and be able to flex and respond to future global or regional events.
The Redwood team is standing by and ready to talk to you about how we can help you and your business growing while avoiding all the potential pitfalls. Email us today and let’s get started,