10 Risks That Can Affect Your Supply Chain Performance

Throughout the supply chain, from manufacturing to delivery to merchandise management, there are many risks that can disrupt the smooth functioning of the supply chain. What are these risks? And how can they be controlled, anticipated and managed? The answers in this article.

 

What are the risks associated with the supply chain?

The supply chain brings together multiple stakeholders (carriers, suppliers, manufacturers, etc.) that are interdependent on each other. Thus, the slightest malfunction in the production or distribution phase can have Adverse consequences on overall supply chain performance. Faced with these challenges, it is essential to know, identify, anticipate and control these risks in order to ensure the operational efficiency of the supply chain.

The 10 risks of the supply chain in 2023

 

According to the 4th Supply Chain Risk Barometer conducted by KYU in January 2023, here are the top 10 supply chain risks identified by industry players:

1. Lack of capacity (under-capacity suppliers, a lack of manpower and an inability to meet demand);
2. An increase in costs (inflation in the cost of raw materials, energy, payroll, etc.);
3. Increasingly frequent cyberattacks and insecure computer systems;
4. The geopolitical crisis (geopolitical tensions cause instability in many supply areas);
5. Logistical risks (lack of manpower, supply and production difficulties, etc.);
6. Volatility of demand (significant and fluctuating demand in the face of sometimes insufficient production capacity, a risk of overstocking, etc.);
7. The scarcity of sources of supply linked to successive crises;
8. The climate crisis (industry players must respond to CSR and environmental challenges and the growing demands of customers in terms of ecology);
9. The health crisis (the risk of new lockdowns in some parts of the world is still present and can have a considerable impact on the proper functioning of the supply chain);
10. CSR requirements (increasing CSR expectations and regulations).

 

Other types of risks can arise in the supply chain and impact industrial performance. These risks can be internal to the company (they are then linked to the management of the activity) or external to the company (when the risks are linked to environmental, exogenous factors).

 

Here are some examples of insider risks that can affect supply chain performance:

• Project management risks;
• HR-related risks (work stoppage, strike, human error, lack of expertise, misallocation of human or physical resources, etc.);
• Computer failures;
• Planning errors;
• Technical problems;
• A disruption in the logistics flow;
• A product quality defect;
• A sudden and unexpected spike in activity;
• Undercapacity or overcapacity of production;
• Delays in delivery;
• Failures in supplier sourcing;
• Regulatory fluctuations;
• Routing problems;
• Supply difficulties;
• Shortages of raw materials;
• A decrease in the number of students;
• A decrease in financial resources;
• …

 

Here are some examples of external risks that can affect supply chain performance:

• Transport strikes;
• A health crisis;
• An economic crisis;
• A cyberattack;
• Theft or damage to equipment;
• Natural disasters;
• Customer defaults;
• …

 

What are the issues related to these risks?

The slightest malfunction in the supply chain can have a considerable impact on overall industrial performance: production capacity and productivity decrease, product quality is impacted, delivery times are extended, etc. All of this can strongly affect customer satisfaction and, ultimately,, the company’s reputation and competitiveness. If these risks are not controlled quickly, these flaws can threaten the sustainability of the business.

 

How to control supply chain risks?

According to Kyu’s barometer, 58% of industry players suffered more than 10 major crises in 2022. To mitigate these risks and secure the performance of the business, here are some best practices to know:

• Identify, map and analyse risks, their impact and their respective emergency plans;
• Setting up regular monitoring (regulatory, geopolitical, economic, logistical, etc.) to monitor these risks, anticipate and manage any crises that may arise;
• Integrate risk management into a continuous improvement approach;
• Implement KPIs (Key Performance Indicators) to monitor operational efficiency and anticipate any possible drop in performance;
• Evaluate your suppliers regularly;
• Diversify your network of suppliers;
• Call on risk management professionals to carry out IT audits, fire prevention checks, etc.
• Anticipating technical, material and quality failures, etc.
• Implement a business continuity plan in the event of crises or potential threats;
• Optimize inventory management to anticipate supplier failures;
• Ensure close collaboration at all times with stakeholders and the various departments of the company and avoid operating in silos, which is very harmful to industrial performance;
• Adopt digital tools and new technologies to modernize flow management and strengthen connectivity between stakeholders (AI, big data, production management software, ERP, WMS, etc.);
• Setting up a multi-sourcing system to diversify its supply and distribution pool;
• Review the traditional supply chain model , which has shown its limits during the health crisis (developing agile processes through digital technology; decompartmentalizing information; reorganizing supply, production and distribution cycles, etc.);
• Integrate risk management into the company’s culture and set up participatory management that promotes communication, transparency, responsiveness, mutual aid, collective intelligence, initiative and innovation.

 

Anticipating supply chain risks through interim management

It is often difficult, internally, to have the necessary hindsight to identify the risks that could impact the performance of the supply chain.

In order to secure the business and control these risks, it will be very wise to call on an interim manager specializing in the supply chain. At WAYDEN, we mobilise the right expert for your sector of activity and your challenges from our pool of 8,000 highly qualified interim managers with 15 to 25 career years.

Thanks to his solid expertise, his many years of experience and his fresh eye, he will be able to identify malfunctions at all levels of your supply chain, carry out 360° audits and set up appropriate risk management plans to ensure the continuity of the industrial performance of your supply chain.