How Risky is your supply chain?
Typically we talk about two kinds of supply chain- A responsive supply chain and an efficient supply chain. An efficient supply chain is mostly targeted at reducing costs while a responsive supply chain is designed to cater to the changing needs of the demand (both new and variant) by building some kind of redundancy in the system. But in both cases have you incorporated the risk element?
Most companies work in environments where they have multiple partners who manage different elements of the supply chain. Since there are multiple partners involved, it is more imperative that the company which dominates the supply chain do a proper risk assessment and management to avoid last minute surprises. In fact if you have failed to do that you have lost the battle as your partners will be doing a similar risk assessment exercise.
As a typical example, the dominating company handles the product design but moves the actual production process to the contract manufacturers. There is definitely collaboration here in terms of co-development and communication of forecast and demand. But what if the contract manufacturer fails to build the product on time? There is loss of revenue and customer goodwill. What if the contract manufacturer tries to go for a vertical integration thereby undercutting the dominant company?
Apart from the above risks, there are other risks like percentage of hazardous elements in the final product, trade restrictions. In light of the above circumstances, companies need to have a risk assessment matrix to quantify the risk and factor it to arrive at a supply chain decision. If you are not doing it, you may miss the bus.
