Risk management in supply chain management means identifying the risks in the supply chain and taking steps to mitigate those risks or eliminate them completely where it is possible. The risks in the supply chain should be identified and then prioritized. Prioritizing of risks helps in understanding which risks are more significant and which are less. The larger the supply chain of a business the more are the likely risks and vulnerabilities.
The risk identification process should cover every step of the supply chain, starting from the customers and going back to the suppliers of raw materials. What-if analysis is very helpful in identifying the contingent scenarios in supply chain management. Adequate response to scenarios that are likely to disrupt the supply chain should be devised.Transportation is an important aspect of supply chain management of a company. Back-up transportation should always be arranged. This ensures that if any type of disruption or breakdown in transportation takes place then it can be immediately replaced by the backup arrangement.
The evaluation of the risks and vulnerabilities of the supply chain should be done on a regular basis. This is necessary because the nature of risks can change due to factors like new suppliers or new government regulations or new contingent developments.The pursuit for supply chain efficiency through continuous cost control should not come at the cost of poor risk management. A business must not hesitate in incurring some extra costs in order to make risk management of supply chain more effective.
Continuous collaboration and communication with supply chain partners goes a long way in ensuring effective risk management of the supply chain. A diversified base of suppliers can help in a situation where one supplier is unable to make timely delivery of raw materials or components.It is to be remembered that any disruption in supply chain management can disrupt the entire operations of the business. It can cause a delay in delivery of goods to customers. This delay can result in customer dissatisfaction. Customer dissatisfaction can result in future loss of sales for the company. Therefore risk management is an important part of supply chain management. Good supply chain managers never ignore this aspect of supply chain management.