Supply Chain Risk Management – SCRM
Information & Training. | Risk Management.
Supply chain risk management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.The benefits of Supply Chain Risk Management include:
A promotion of supply chain flexibility and responsiveness. The more flexible a supply base, the faster responses to change demands, then the lower the inherent risks.The process of identifying risks along a supply chain, promotes open flows of commination. This creates improved understanding of challenges along the supply chain, which can result in improved relationships.
Best practice is encouraged throughout the supply chain. For example, sub-suppliers operating deficient equipment maintenance regimes are clearly a risk to the integrity of the entire supply chain. Therefore, a focus is placed on promoting best practice throughout the supply chain, with resultant benefits to all involved.
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SCRM – “Known” and “Unknown” Risks:
Risks within the supply chain, can be categorized into “Known” and “Unknown” risks. Examples of Known risks could be critical equipment breakdown within a single source supplier, adverse weather impacting delivery schedules, un-anticipated price increases in critical raw materials, receipt of defective components, labor shortages, strike action, government taxation increases, changes in legislation, etc..As the above risks are known, then impacts can be reviewed in advance and mitigation actions put in place to address
Unknow risks are clearly much more difficult to plan and mitigate against, as the risks are not foreseen in advance. An example of a previously “Unknown” risk could be along the lines of the recent covid-19 pandemic response, which resulted in governments world-wide ordering closure of many manufacturing, distribution, service facilities with consequent supply chain disruptions.
There are two aspects to planning for “Unknown” supply chain risk.
The first is to identify the supply chain in terms of a process flow diagram and to pick process steps, and without knowing the cause for a risk arising, to determine the impact of the loss of that step in the process flow.
The second stage of “Unknown” risk planning, is to determine the level of response that would be needed where the identified process step becomes unavailable for any reason.
Implementing a SCRM Process:
The risks associated with the SCRM process will range from very specific operational risks e.g. an item of critical process equipment breaking down within a supplier, to broader risks, for example a government embargo being placed on products manufactured in certain countries, where your supplier could be placed, or where your supplier’s critical sub-supplier could reside. However, regardless of the operatorial level of the risk, the same tools and techniques can be applied to identify, analyze, evaluate, monitor, etc..Use of the same tools and techniques across all risk management activities, promotes improved acceptance and understanding of the risks tools.
Information & Training.
Risk Management.
- Risk Identification. Risk Evaluation. Risk Mitigation. Risk Control. Etc..
- Risk Processes. Risk Planning. Risk Reporting.
- Requirements. Standards. Current best practices.
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Resources:
International Organization for Standardization – ISO 31000 – Risk Management