Six Common Strategies for Supply Chain Risk Management
Six Common Strategies for Supply Chain Risk Management
Supply chain risk management is currently one of the fastest growing areas , given the increasing volatility in businesses worldwide . With changing business requirements and a higher degree of uncertainty , supply chain strategies can no longer enjoy a static presence . With increasingly fluctuating demands , businesses need to consider internal and external risks and ensure that the detrimental impact of each is overcome . In order to ensure supply continuity , companies now have to ensure regular and continuous risk assessment in order to reduce the vulnerability in their processes . Supply chains in the current era therefore , need to be both agile and robust in order to identify asses , control and monitor their risks to deliver a better performance . Strategic supply chain risk management is divided into six major categories .
Risk Avoidance
The first and foremost strategy to be used in risk management is that of avoiding risks . Supply chain managers need to be aware of the trade-offs associated with different options such that the operational uncertainty is reduced . Risk avoidance may include opting for less volatile markets or timely divestment to avoid losses .
Time Postponement
In such a strategy managers induce greater flexibility by delaying the final product delivery , assembling , packaging or any other feature . For industries which deal with high levels of customization , postponement allows to reduce the uncertainty by fulfilling the final steps only after the customer order is placed .
Risk Speculation
Speculation , as the name implies is a strategy which calls for decision making based on demand predictions . This strategy is usually used in environments which have specific criteria and standards for the concerned product .
Hedging Hedging strategies such as dual sourcing , allow supply chain managers to eliminate risks associated with a single event in order to avoid a complete failure of the supply chain .