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Supply Chain Management: Minimizing risk in today’s complex supply chain

Posted by Dave Kravitt, CPIM

supply_chain_managementThere is no question that today’s global manufacturing marketplace has brought increased complexity to the supply chain. Even the smallest manufacturers might establish supplier partnerships and source raw materials around the world as growing competition and market volatility cause growing concern for material availability and costs. 

The result, of course, is increased risk across the supply chain, influenced by three key factors: overall supply chain complexity, procurement issues and demand volatility. How companies deal with the increasing supply chain risk will have a direct effect upon their growth and success. 

One thing is clear – for many companies, it will be essential to change the fundamental relationship between manufacturers and suppliers. As products and the technologies used to make them become more complex, more rigorous specifications requiring greater quality control, traceability and more demanding good manufacturing practices (GMP) will put tremendous pressure on suppliers. This, in turn, will result in greater supply chain risk that may have a profound, negative effect upon the supply chain. In many cases, it will not be willful disregard or intentional negligence on the part of the supplier, it will simply be a question of their available resources and ability to meet the manufacturer’s changing needs. The best way to address this issue may be to have the manufacturer shoulder a portion of the risk faced by the supplier. 

So what does this mean? Simply that manufacturers will need to be more willing in the future to lend their suppliers a helping hand, perhaps with some form of financial and/or technical support, if needed. Common sense should tell the manufacturer that if a particular supplier is crucial for the manufacture of their products, the manufacturer should be open to helping that vendor meet the manufacturer’s evolving requirements. In this way, the risk gets spread around, posing less of a threat to the supply chain and enabling more effective supply chain management. 

In general, manufacturers facing growing supply chain complexity will need to get more proactive in supply chain management. For starters, they should consider three basic best practices to mitigate supply chain risk: 

  1. Ensure supply chain flexibility and agility, providing the ability to react quickly and easily to changing market needs. That means focusing on end-to-end visibility, real-time analytics and predictability. 
  2. Streamline supply chain organization. Start by centralizing its infrastructure for better monitoring, analysis, and decision-making. 
  3. Implement and maintain a response and recovery plan to minimize any negative effect from unexpected supply chain disruptions. 

To learn more about effective supply chain management, download our white paper “5 Characteristics of a Competitive Process Manufacturing Supply Chain.”

 

Tags: Supply Chain Optimization, Supply Chain Planning