Managing Supply Chain Risks Checklist
Checklist to proactively manage key risks to your supply chain.
- Mark all that apply.
- Does your supply chain function in such a way that resources are committed or mobilized before they need to be (i.e. in advance of customer demand or before the next downstream step in your supply chain is ready)? If so, consider a risk management strategy of POSTPONEMENT to increase flexibility and avoid spending before it is necessary.
- Does your supply chain have opportunities that can be exploited by strategically committing resources through a process of selective risk taking? If so, consider a risk management strategy of SPECULATION to anticipate future demand.
- Does your supply chain rely on a single supplier or single market to remain profitable? If so, consider a risk management strategy of DIVERSIFICATION to give you the flexibility to adapt to outside variables that you do not have control over, such as natural disasters or drastic price increases by a supplier.
- Does your supply chain interact with or depend on any uncertain variables such as unstable markets or unreliable upstream suppliers? If so, consider a risk management strategy of AVOIDANCE through active research closely tied to strategic actions such as exit strategies from specific markets.
- Does your supply chain have opportunities for you to take control of either upstream or downstream systems, processes or decision-making? If so, consider a risk management strategy of VERTICAL INTEGRATION to minimize uncertainty in the flow of your operations.
If you marked any of the boxes above, consider employing a simple risk management methodology:
- DEFINE – Define the potential risk to your supply chain. Consider the ways in which risks are often interrelated and can therefore pose exponential threats.
- ASSESS – Measure the potential risk to your supply chain. Consider ‘hard’ financial costs and also ‘soft’ or indirect measures such as opportunity cost and employee morale.
- MITIGATE – Develop and implement an action plan to avoid risks and exploit opportunities.
- CONTROL – Monitor the action plan, document the impact, and remain flexible if results are not attained and risks are not being managed as desired. If necessary, re-define, re-assess, and re-mitigate.
J. Paul Dittman. “Supply Chain Transformation: Building and Executing an Integrated Supply Chain Strategy” (McGraw-Hill, 2013), pp. 33-42.