EVALUATING RISK TO YOUR SUPPLY CHAIN
You can’t be complacent when it comes to potential threats in your supply chain. Here’s how to stay on top of your risk evaluation.
isk is an inevitable, integral part of business. The big question is, how do you evaluate risk in your supply chain, and what action will best manage or avoid risk altogether? Warren Buffet has said, “Risk comes from not knowing what you are doing.” As that relates to supply chain management, we call this visibility. The question then transitions to, “How can I better know what is happening in my supply chain?” To answer that question, let’s first look at two universal risks in the supply chain today.
SHANNON VAILLANCOURT THE “AMAZON EFFECT” The most prevalent risk factors to a supply chain have evolved over the past decade. With customers expecting faster and faster deliveries, one of the biggest supply chain risks is not having the product you need when the customer orders it — and not being able to meet your customer’s delivery requirement. The availability and delivery factors have evolved over the last few years due to the “Amazon Effect.” Consumers (and B2B customers) have grown to expect — or demand — both selection and speed largely attributable to the success of Amazon’s business model. Forbes recently published that Amazon
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not only dominates e-commerce with a 43% share in the US, Amazon also accounts for more than half of the incremental growth of online shopping. So the two risk factors of availability and delivery are only going to grow in significance. Fortunately, shipping managers are very good at understanding and mitigating the risk of availability and delivery. Oftentimes, they are avoiding this risk altogether through higher product costs or shipping costs. That’s because it’s a bigger sin to not have the product than it is to overpay for it. THE SLOW-DRIP PROFIT LEAK Some risk factors have an immediate effect, like a supplier bankruptcy or a widespread weather delay. However, the risks surrounding lack of availability or delayed delivery typically cause a slow-