Manufacturers face a multidimensional challenge in managing supply chain risk. They must prevent production disruptions, ensure business continuity, ensure compliance with regulatory requirements, and meet customer expectations, all while controlling costs and protecting profitability. Most also have internal initiatives around sustainability and ESG.
For manufacturers, almost all parts of the business connect to the supply chain. Therefore, you cannot ensure operational and business continuity, improve Scope 3 emissions targets, know if your products are free of child labor, and so forth without considering your supply chain.
Supply chain risk management solutions give you the ability to manage risks holistically. Here we will look at how different SCRM use cases can be used across different departments and functions using the same information and processes.
The Building Blocks of a SCRM Solution
Mapping
The first step in a supply chain risk management undertaking is to map your network. This could include your suppliers, your manufacturing facilities, warehouses, logistics nodes, shipping lanes, or even your customers’ locations.
To derive value quickly, most companies start by focusing on an initial goal for one business department, use case, or product line.
This should be a measurable goal, not just a visionary statement. Most companies want to increase market responsiveness or improve resilience. While these are important goals, by themselves, they are not quantifiable. Measurable goals are how you achieve the vision.
Let’s say your company’s goal is to reduce production stoppages by at least 20% for your top-selling, flagship product.
First, you create a digital twin of this product’s supply chain. This would include, at a minimum, Tier-1 suppliers along with manufacturing and distribution facilities.
Risk Assessment
Next, you use a risk assessment solution to understand the external risks associated with each of these suppliers and locations. These external risks are multidimensional, and include weather and climate-related risks, tax and legal issues, socio-political factors, operational risks, and so forth. This will help you uncover if there are critical issues that you need to address.
This could mean working with Tier-1 suppliers to make changes to the supply chain. It could also mean slowing down the amount you spend with one supplier in favor of another supplier.
Some risks you might decide you can live with, since it is impossible to have zero supply chain risk. In this case, you would use scenario-planning to prepare for the most likely or most disruptive risks.
Risk Monitoring
Then you leverage risk monitoring. While risk assessments give you the details of underlying issues, risk monitoring gives you early warnings about day-to-day disruptions.
Risk assessment will tell you that Supplier A is in an area prone to flooding; risk monitoring will tell you that a hurricane is heading towards Supplier A’s location.
Since you have prepared for this exact issue during your scenario planning, you have a pre-approved plan that you can put into action.
These risk alerts give you a first-mover advantage to act before a potential disruption occurs.
Other use cases
You now have a clear insight into potential threats that could impact the supply chain of your flagship product. You can proactively reduce strategic risks and get an early warning of potential disruption. As a result, you will reduce unexpected production downtime by getting ahead of risk.
However, there are other ways you can use the same information. You could also tailor alerts for facilities managers, production supervisors, HR, and so forth to give them early warning of risks such as extreme weather that could impact your office and manufacturing locations.
This would mean that you could switch manufacturing to a different location during a disruptive event. This not only protects profits, but also people.
Real world example
In January 2021, a polar vortex swept across the Northern Hemisphere, bringing extreme winter weather that caught many off guard. However, the Everstream Analytics Applied Meteorology team detected the disruption early. Using advanced atmospheric models, Everstream issued targeted client alerts. These provided operational guidance on regional risk zones and timelines.
Armed with these predictive insights, a global beverage client with a major production facility in Houston began scenario planning two weeks ahead of the storm. Recognizing the direct threat to their people and operations, leadership made the unprecedented, C-level-approved decision to preemptively shut down the plant. Employee safety was a critical part of the response.
Guided by Everstream Analytics projections, the company took further proactive steps to keep operations running:
- Relocated labor and resources outside the primary impact zone to keep personnel safe and productive.
- Redistributed inventory from Houston to more resilient regional warehouses.
- Prioritized shipments to retail stores in less affected areas to maintain product availability.
When the storm struck Texas, it caused catastrophic blackouts and infrastructure failures. The company’s Houston plant was severely impacted. Yet thanks to our alerts and their early action, the beverage giant kept their people out of danger and minimized operational disruption. They also resumed normal operations significantly faster than their peers.
