Limitations of Supply Chain Network Design Tools for Risk Management

Supply chains continue to increase in complexity as they are leveraged to drive higher value through increased output at lower costs. The more intricate supply chains become, the more difficult (and necessary) it becomes to analyze risks simultaneously.

Risk analysis becomes more difficult as risk visibility decreases and complexity increases. It is quite easy to see risk drivers in simple supply chains, but as additional departments and components are added, risks become obscured.

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How to Manage Supply Chain Risk and Ensure Continuity

“With great risk comes great reward”, said Thomas Jefferson. What he failed to mention was that great risk also brings the potential for great loss — just ask any hedge fund or investment manager. Risk is not something only investment firms have to acknowledge. Every company, especially manufacturing companies with large supply chains, have the challenge of managing risk.

Because of the potential for loss, it is important for organizations to mitigate, manage, and handle risk in their supply chain if they want to ensure customer satisfaction, experience greater profitability and outcompete competitors. People running supply chains certainly know that risk management is important, but do they know just how important it is?

The data says no.

Previous studies have found that many supply chain executives are apathetic towards managing and assessing risk. For example, none of the organizations in the study use an outside source for assessing the risk in their supply chain, yet most organizations will bring in consultants for employee management, marketing, sales, and finance. A shocking 90% of organizations do not consider risk when outsourcing their production, which could have dramatic effects on the speed of their supply chain.

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Supply Chain Brief