Supply Chain Risk Management: A Four Step Framework 

(SCRM) is the process of taking strategic steps to identify, assess, and mitigate the risk in your end-to-end supply chain. A comprehensive approach to SCRM involves the management of all types of risk, for all tiers of supply and all risk objects (suppliers, locations, ports, and more).

In this article, we outline four basic steps to follow for establishing Supply chain risk management for your organization. 

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1 – Identify Risk Exposure

Identify the organizations risk exposure including threats to specific supply chain components.
The ideal approach to identifying the potential supply chain threats before they materialize is by using advanced predictive analytics to identify potential.

 When major disruptions occur, the fragility of many supply chains is exposed. Supply chains that lack redundancy or alternative suppliers tend to take a long time to recover once they break down. To prevent this sustained business interruption, companies must proactively plan for disruption by using advanced predictive analytics to identify potential supply chain threats before they materialize. Even if disruptions cannot be avoided – for example, few companies can avoid the supply chain effects of a global pandemic – your company and your customers will have thought about your strategy well beforehand. This will enable you to respond quickly, and in some cases weeks to months ahead of competitors. “Robust” SCM strategies possess two properties:

1. They enable a company to manage the inherent fluctuations in supplies efficiently, regardless of the occurrence of major disruptions.

2. They make a company’s supply chain more resilient in the face of major disruptions.

While there are costs for implementing robust SCM strategies, they can pay dividends. Companies with proven, resilient supply chains are more attractive to customers looking for new suppliers in the wake of a major regional or global disruption.

2 – Detail The Risk

Ask “what if” questions about your supply chain, like “what if a key supplier goes offline for a few weeks?” This will help you assess what points in your supply chain could pose threats to your business. Remember that the best supply chain strategy is one you can accomplish. Make your “what if” questions specific, not general; practical, not conceptual. Include elements of the process, technology, organization, control philosophy, and metrics. Throughly cover the details. It’s not enough to say that you want to employ global sourcing, for example; to implement the strategy, you must specify the components, the countries, and the suppliers to carry out your supply chain strategy.

3 – Evaluate Risk Probability

Over the last 10 years, we have witnessed many types of unpredictable disasters, including terrorist attacks, wars, earthquakes, economic crises, large-scale hacks and data breaches, and the most recent COVID-19 pandemic. Many of these disasters, including environmental catastrophes and pandemics, are becoming increasingly likely due to climate change. Both the frequency and cost of business disruptions have been increasing and are likely to increase further.

Unfortunately, many of the strategies that businesses adopt to increase their financial performance only serve to make them more vulnerable to supply chain disruptions. For example, businesses may increase product variety, cut costs by turning to a just-in-time (JIT) inventory system or vendor-managed inventory or outsource manufacturing to eliminate costly assets. These initiatives are powerful and effective in a stable environment, but they necessarily increase the length and complexity of supply chains. As a result, cost efficiency comes with potentially huge hidden costs when major disruptions occur. Companies must balance the notion of cost efficiency with agility, adaptability, and alignment. Also, supply chain disruptions can have long-term negative effects on a firm’s financial performance due to lost trust from clients and customers.

Map the Possible Causes of Supply Chain Risk and Disruptions

Examples of Known Causes:  

1. Global trade wars
2. Raw material shortages
3. Equipment failures at one or more suppliers
4. Theft and fires during transport or in existing supply inventory
5. Natural disasters

Examples of Unforeseen CausesEconomic uncertainty and port disruptions

1. Tougher environmental regulations
2. Safety recalls 
3. Socio-Political events, including terrorist attacks and war
4. Global Pandemic

4 – Adapt to Changing Business Realities

Many SCM initiatives fail because they are constrained by the existing structure of your supply chain. Too often in these cases, the supply chain is tweaked based on a limited short-term perspective, when it needs to be optimized by radically altering practices and processes. Frequent re-examination of the supply chain, with no limits placed on the assessment, is necessary if companies are to ensure that the supply chain strategy remains effective. Economies evolve, markets evolve, and channels evolve, and so the supply chain must evolve as well. What works in one business environment may be unsuccessful in another. Continual adaptation of the supply chain to support frequently changing business realities — particularly new product introductions and new business launches — is a critical step to enduring market leadership.

Ensure communication between key stakeholders

It’s common for varying divisions and also objectives within your business to come into conflict with one another. For example, sales may set an objective based on quarterly revenue targets, regardless of implications for inventory management and storage costs. Manufacturing managers may be entirely focused on cost reduction, while losing focus on how it will affect the end-user. With these different perspectives competing against one another, cost, service, and revenue are not optimized. This can weaken your supply chain to such a great degree that it ultimately affects your company’s performance. Open discussion among business units and a management-led initiative to achieve a carefully crafted supply chain strategy is essential to ensure that decisions benefit the company as a whole.

Why Quasar Is Your Partner Of Choice

Quasar intimately understands the supply chain challenges of today’s medical device market. We provide guidance for our partners throughout the entire product development lifecycle to ensure the safety and reliability of their products. We value communication, reliability, and transparency at every stage. 

Being a trusted partner of tier one OEM medical device manufacturers for the better part of four decades, Quasar’s experience, knowledge and wealth of data enables us to give our partners a truly competitive advantage. 

Quasar specializes in the manufacturing of minimally invasive devices requiring complex assembly. We offer advanced engineering technology, international quality production standards and strict quality control.