As material shortages, transportation delays, and longer lead times continue to disrupt supply chains around the world, it’s increasingly important that supply chain managers work to pro-actively identify, rank and mitigate potential risks.
Risks to product availability are always present, both at an industry-wide and company-specific levels. Global risks – including extreme weather, raw material shortages, transportation delays and geopolitical conflicts – are becoming more common, and require a more rigorous level of risk analysis and management. Company-specific risks within the day-to-day supply chain operation – including component obsolescence, stock outs, backorders and excess inventory – also require a higher level of scrutiny.
To gain a better understanding of their company’s current risk exposure, supply chain managers need to take necessary steps to ensure visibility into potential risks at the component level. Once those risks are identified, they must be rank-ordered and prioritized based on the likelihood and extent of potential disruption they could cause. This ranking gives supply chain managers clear insight into their top threats, as well as an understanding of the frequency with which each risk should be evaluated.
Using Risk Scoring to Identify Weak Links in Your Supply Chain
If visibility at the component level is inadequate, or an internal risk identification and ranking discipline does not exist, adoption of an industry best practice may be a necessity. One effective way to initiate that process is application of Dynamic’s Supply Chain Risk Scoring,SM a proprietary methodology that evaluates the key factors that can affect product availability, and provides a clear assessment of the strength and resiliency of the related supply chain.
Dynamic’s risk scoring process evaluates and scores risks based on multiple risk categories and offers related mitigation solutions. Here’s a sampling of those risk categories that represent potential weak links in your supply chain:
Validating only a single part number for a particular product can create sourcing constraints and cause disruption during technology lifecycle changes.
Concentration of Custom Products
Custom components can be a valuable solution for extending the life of a product, but entail the risk of availability constraints or unforeseen supplier events.
Ordering from a single supplier or from within a single geographical region increases the likelihood of adverse weather or transportation issues.
An unexpected obsolescence of a product’s component can disrupt an entire platform. Lack of visibility to end-of-life dates or selecting components with a short lifecycle can increase risk.
Inventory Level Buffers and Safety Stock
Without an optimal level of safety stock on hand, the risk of supply stock outs is greater, and the ability to meet unexpected demand is reduced.
It’s important to understand that existing risks continuously evolve, new risks arise, and all risks require frequent reprioritization. In the current environment, transportation shortages may be the weakest link in the supply chain. In six months, it may be a weather-related, or due to labor issues at a major supplier. Scheduling regular checkpoints to reevaluate risk exposure is an important part of a company’s risk management plan.
Supply chain managers must continue to strive for increased visibility across their supply chain landscape. Leveraging the deep expertise of a solution provider such as Dynamic can greatly strengthen the identification, ranking and mitigation of supply chain risks. Contact Dynamic for a complimentary, self-diagnostic tool that can provide initial insight into your company’s risk exposure. And let us know if you would like to have an in-depth conversation regarding your company’s current supply chain priorities.