EXTERNAL SOURCES OF SUPPLY CHAIN RISK AND RESILIENCE:

EXTERNAL SOURCES OF SUPPLY CHAIN RISK AND RESILIENCE:

Ajith Watukara - MBA, BSc - MASCI-Australia - CCMP-USA Ajith Watukara - MBA, BSc - MASCI-Australia - CCMP-USA

Ajith Watukara - MBA, BSc - MASCI-Australia - CCMP-USA

Global Supply Chain Leader - Transformation & Operations | Lean Management Experts | Certified Digital Transformation Catalyst | Six Sigma Master Black Belt | Corporate Adviser & Trainer | Recruiter

发布日期: 2024年1月7日
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"The real competition is between supply chains, not companies." -

Martin Christopher"

Supply chain risks are ever present.?If you think of the supply chain as a ship?it's rarely on a calm sea.?Waves from a variety of sources can rock the ship?and can even sink it if we are not careful.?So it's critical to understand the sources?and drivers of risk within the supply chain.?

Those things that make our sea choppy.?We're going to talk through those so you can reflect,?categorize the risks and prepare and plan.?And we going to start with external risks.?Those things that create waves that we seem to?have little control over.?

Those are often the risks that people think of first.?In simple terms, external risks come from three places.?The demand side, our customers, and the customers?of our customers, the supplier side, our suppliers?and the suppliers of our suppliers.?And also the environment we operate in,?not just the physical environment,?but the economic, political?or social environment and context we work in.?

Let's dive into each of those a little deeper.?Demand risk is caused by unanticipated demand.?All of a sudden everyone wants your product.?And then a few weeks later, no one wants the product.?It creates disturbances to the flow of product.?Information and cash?that comes from the supply chain network?between our businesses and its customers.?

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For example, during the pandemic?companies had multiple issues.?One was having enough cash in the bank to stay afloat.?As suppliers wanted fast payment?and customers wanted to pay slowly.?This resulted in more money going out than coming in?for many organizations, which is always dangerous.?Cash is like the life blood?of any supply chain,?without cash businesses can die.?

But also when demand drops?or increases or customers buy different products?this creates risks for organizations.?Next is supply risk, which is the upstream equivalent?of demand risk.?It's caused by disturbances?in the flow of product or information?from suppliers within the network upstream?of our business.?In a similar way to demand risk,?the disruptions of key resources coming?into the organization can significantly?impact its ability to perform.?

Shortages of raw materials?or supply delivery times extended?as well as changes in prices can force a businesses?to rapidly adapt.?Environmental risk is the risk from uncontrollable events.?The risks can impact the business directly,?all through its suppliers and customers.?

Environmental risk is broader than just natural events?like earthquakes, pandemics, or storms.?It also includes changes in legislation?or customs procedures or geopolitical disruptions?created by tariffs.?And environmental risk spills over?into another area that organizations are?increasingly considering,?that's ESG risks,?environment, social and governance risks?within a global supply chain.?Put simply, ESG risks ask how our supply chains?impact the environment, how it impacts society,?and whether there are governance controls?in place to stop individuals acting in?a fraudulent or exploitative way.?

Effective supply chain resilience?requires a sound understanding?of our external risk to ensure your business?has processes to monitor these effectively.?So give some thought to the external risks?that can rock your boat.?Once identified and understood,?you can prepare and plan reducing their impact.?Or in other words, if you know how rough your ocean is?you can build a ship to travel that ocean.



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