Supply Chain Risk Management - Beyond Crisis Mode

According to a report by Reuters, supply chain disruptions due to geopolitics, natural disasters, COVID-19, and cyber cyber-attacks may have caused up to $4 trillion in lost revenues in the past couple of years. 

Chip shortages of the past two years alone have resulted in revenue misses of more than $500 billion worldwide between the semiconductor and its customer industries, with lost auto sales of more than $210 billion in 2021. 

Many are predicting that semiconductor shortages and supply chain issues will last into 2024. In fact, research conducted by McKinsey states that supply chain disruptive incidents are increasing in frequency, making these potential business losses more and more important to account for and to try to mitigate. The report further estimates that on average companies will experience supply chain disruptions every three and a half years which may cause 40-45% EBITDA losses over the next decade. 

Managing supply chain risk beyond crisis mode 

Organizations have been focusing on navigating and mitigating the current supply chain issues but need to be preparing for the next disruption. Companies need to be looking beyond the current supply chain crisis and be developing strategic supply chain plans.

Your company supply chains must be:

·      Resilient, so you can anticipate, pivot, and acclimate to disruptions whenever and wherever they occur. 

·      Agile, so you can quickly, and cost-effectively mitigate any disruptions.

·      Transparent, so you can gain the trust of consumers and stakeholders and meet your organization’s sustainability goals. 

Complexities in the global supply chain make it increasingly difficult for companies to get started in building robust and strategic processes that can navigate the new supply chain paradigm.

Having deep and dynamic visibility within the entirety of your supply chain from design to delivery is key to understanding your internal and external risk factors. 

Here are some key points to consider when setting up your strategic supply chain strategy:

·      Your supply chain starts with your design, access to a broad range of data from component parametric, compliance, and market availability to lead-time and pricing helps you create a robust design that includes component alternatives helping you with the procurement process and your overall product lifecycle management. 

·      Mapping and monitoring your supply chain with access to real-time and relevant event alerts will help you assess and analyze your supply chain vulnerabilities and quickly mitigate any problems as they arise.  

·      Diversifying your supply chain and multi-sourcing will also help you reduce dependencies and alternatives during potential disruptions.  

·      Understanding your suppliers down to the sub-tier suppliers will help you build insight into their strengths and weaknesses so you can build strategic partnerships. 

·      Developing, compliance project management strategies will help you adhere to governmental regulations and standards. 

·      Develop and manage your Corporate ESG and sustainability goals, metrics, and reporting plan to help build trust and consumer and investment confidence. 

All these key points will help you build agility and resiliency, and strengthen your long-term organizational health and competitive edge.