Embracing Supply Chain Risks
Examining Risk Aversion
What is it about risk aversion and uncertainty that can leave us feeling empty and uneasy? Uncertainty is the guest we’d rather not invite out to team lunch, the one we might avoid chatting with over water cooler talk, or the call we let go straight to voicemail. There is a natural tendency to avoid the unknown for fear of the unfamiliar or complex outcomes, yet uncertainty is an inevitable reality of everyday business. A large part of successful supply chain management is getting comfortable with uncertainty and effectively managing risk.
When organizations are able to maintain a keen awareness of possible challenges that lie ahead, they avoid being blind sided, are well equipped to address roadblocks, and can pivot quickly to better support the ever changing needs of the business.
Prepare for Disruptions
The following are major supply chain risks to be considered:
External disruptions such as an economic downturn, political instability, government mandates or restrictions, currency fluctuations, and raw material cost increases which can all disrupt the flow of goods.
Upstream or downstream disruptions with suppliers such as pandemic impacts to manufacturers, capacity, logistics, and production planning issues which can cause delays or lost business opportunities.
Surface level relationships with only a few key suppliers based on weak communication and transparency, which can lead to missed opportunities or misalignment of goals and synergies.
Supply Chain Management
Supply chain efficiencies have not historically been a primary focus for organizations when considering profitability and scrutinizing operational costs. In 2020, the pandemic revealed just how fragile our existing supply chain infrastructures are. The disruptions continue to negatively impact retailers, spilling over to the global economy. Few industries were equipped with an efficient and seamless supply chain capacity to withstand the effects.
Successfully managing supply chain operations requires continuously monitoring and adjusting your strategy, including embracing uncertainty and creating a plan to get ahead of potential disruptions. Regularly identifying risks relevant to your business and taking appropriate mitigation measures is an important practice. Having a diversified network of suppliers built upon deeper relationships of trust, hedging against currency fluctuations, and partnering with suppliers on contingency plans are a few ways to improve supply chain resilience and agility to better handle disruptions and uncertainty.
Facing Uncertainty
Instead of fearing potential downsides connected with the unknown, it is helpful to view supply chain challenges as lessons presented to us allowing growth and learning. Let us make friends with the discomfort, and not shy away from the opportunity to rise above adversity and emerge stronger. Let’s grab a coffee with uncertainty, get to know one another a little better, make them feel welcome, and get comfortable coexisting on the same team. They aren’t going anywhere just yet.
