Strategies for supply chain optimization and risk management
February 8, 2023
The COVID-19 pandemic highlighted the fragility of global supply chains, illuminating how certain disruptions can cause significant ripple effects. Businesses today continue to grapple with ongoing disruptions, ranging from labor strikes to increased commodity prices and inventory shortages. How can companies manage these risks on an ongoing basis?
An optimization-driven approach is necessary for businesses to remain competitive while also ensuring that they are not overexposed to externalities such as natural disasters or labor strikes. This means taking a close look at all aspects of the supply chain including sourcing materials, production processes, logistical optimization, and inventory management. Focusing on optimization can help create more resilient supply chains that can better weather future disruptions, including using predictive analytics to identify potential risks, supply chain simulations for proactive risk management, and close monitoring of vendor compliance.
In addition to optimization, risk management is key when it comes to managing global supply chains during uncertain times. By mapping out potential risks and developing disaster recovery and backup plans, businesses can reduce their vulnerability to supply chain disruptions. This can involve diversifying suppliers, increasing safety stock, or leveraging alternative transportation options.
Another key aspect of supply chain management includes ongoing operational review. This includes monitoring and measuring KPIs that illustrate supply chain performance, both at the Tier 1 level and further down the value chain. This includes not only statistics relating to delivery, backlog and costs but also environmental and social factors.
Moreover, supplier audits are also a critical part of measuring and assessing performance, as well as verifying compliance with labor and environmental standards. Equally, implementing risk analysis tools such as financial hedging and insurance policies can reduce potential losses due to supply chain disruptions.
By focusing on optimization, risk management, ongoing operational review and verifying compliance, businesses can create more resilient global supply chains that are better able to support their operations during times of uncertainty. Through ongoing operational review and optimization, companies can develop proactive strategies for mitigating risks while ensuring compliance with environmental and labor standards. With a focus on optimization and risk management, companies can continue to manage the ongoing risks posed by global supply chains.
CPM
