Top 3 Steps you can do to Limit Risk in your Supply Chain Today
If the pandemic has taught us anything, we need to be prepared for the “what ifs” because they are increasingly more likely “when.” What if parts of Europe are at war? Happening. What if China is serious and committed to returning Taiwan to its tight control? According to the most recent reports, that is a “when,” too. And how about those natural disasters- tsunamis, flooding, etc.? You get the point. So, in this increased climate of uncertainty, what can you do to protect your supply chains?
First, let’s talk about the main “why” you should be doing this now. If you plan now, you don’t need to “catch up” when the crisis happens. Hopefully, your competitors are procrastinating on this issue right now, and then when you recover from the disaster more quickly, you will gain their market share. This is basic risk management, right? But more than planning for the future, using these steps will limit your exposure to all types of risk and save you money. Did I also mention that they are the basics we teach in the circular economy for supply chains class? So you get to be more resilient, lower risk, and green- say it isn’t so.
1. Map your logistics network and look for hotspots
What are hotspots? Those are the areas where what-ifs are more likely a when. They are areas in the world where natural disasters are more likely, labor violations are prevalent, and political unrest has a long, complicated history. Suppliers in this area should not be your critical suppliers. Think about the microchips in vehicles and the fact that the largest manufacturers of cars in the world had to shut down production because they had a supply chain disruption (COVID) in a critical part. History tells us this is not a good idea. Plus, from a sustainable perspective, keeping your supply chain a little closer to your facility is better. This obviously saves fossil fuels (diesel) but think about this, China had a completely different lockdown perspective than the United States, and therefore the facilities were operating on different schedules. This does not mean that a domestic manufacturer with a domestic supplier may not have issues; it just means that you are more likely to operate from the same set of laws, ordinances, and overall government structure around disruptive issues.
2. Decentralize your supply chain if possible
Long-time supply chain expert, Adam Elson, is a firm believer in this. Don't put your whole supply chain in one region/area as much as possible. And definitely don't do that if it is not in your area and across many miles of the ocean. Diversifying your suppliers and having backup suppliers in different parts of the world helps ensure you are never 100% reliant on a single area. This is important for natural disasters or even political unrest.
3. Use process mapping to eliminate all waste in your products.
A seldom talked about area of supply chain risk is limiting the number of materials needed in your product, thus limiting the number of suppliers in your supply chain. Say- what? Every time you procure a material, there is a risk- quality, lead time, payment terms, etc. Every time you eliminate an input to your product or packaging by redesign, you need to make one less procurement action, thus limiting your risk by one. Let's say your product contains hazardous material. For circularity, this isn't good. It also means that you are very likely to procure that material from areas known for hazardous chemical manufacturing. Redesigning a product to no longer contain that material reduces the significant risk for the manufacturer, including procurement.
In the end, these are simple examples of what you can do to reduce supply chain risk. Of course, complicated algorithms can do some of these functions, but the point of this blog is to get you thinking in this way. Once you shift your thinking, a new world will open up for you to start seeing how little changes can make a big difference in reducing risk.
Denice Viktoria Staaf
Supply Chain Diva | Sustainability and Circularity Expert | EPD and HPD Approved Preparer | Mentor and Coach | Supporter Women's Empowerment | Green Building Advocate
Member, Education and Research Executive Board (EREB)
VCARE Academy Inc.
Labeling Sustainability Inc.
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