Supply chain risk management (SCRM) identifies, assesses, and mitigates risks within the supply chain. It’s about anticipating problems before they arise, allowing businesses to adapt and avoid disruptions. But how does this support planning professionals?
With an effective supply chain risk management strategy, and the technology to support, your planning team can receive the insights they need to prioritize and address the most impactful risks and opportunities. Here are just some of the benefits of supply chain risk management for planning:
1 – Monitoring disruptions
By seeing a problem before competitors, companies can enhance agility. When risk increases for a key product or material, the company can shift to alternates to ensure supply ahead of competitors or stockpile critical inventory before a price hike or shortage.
Organizations can extend this advantage to form long-term plans that reduce risks for specific product lines. For example, knowing that they are dependent on a single supplier for a critical raw material, a company can plan to build more inventory or dual source. This information can also inform contract negotiations with new or existing suppliers.
2 – Sourcing bottlenecks
With sub-tier visibility, companies often uncover “sourcing diamonds.” These are supply relationships where a company has multiple Tier 2 suppliers for a critical part, but those Tier 2 suppliers are all sourcing materials from one or two Tier 3 suppliers.
Strategic supply chain mapping helps identify these sourcing diamond dependencies at the Tier 2 level. Uncovering Tier 2 sourcing diamonds can drive the need for a further deep dive into the affected sub-tiers.
3 – Compliance risks
Companies may discover looming compliance risks from a Tier 2 supplier being on the UFLPA watch list, for example, or by supplying material from a region prone to using child or forced labor. Uncovering these connections is a strong indicator of the need to explore deeper sub-tier visibility. Learn more about how SCRM supports compliance here.
4 – Scope3 carbon emissions
With more and more companies setting clear Scope 3 reduction targets, strategic visibility can help identify low-hanging fruit in Tier 2 for impactful results. For example, uncovering a Tier 2 steel supplier (emissions-heavy processing) can trigger a discussion with the related Tier 1 supplier to switch to green steel for a surcharge. Or a Tier 2 connection may lead to a supplier cluster in a region reliant on inefficient CO2 energy. (e.g., coal energy). If this cluster can be switched by incentivizing the Tier 1 to change one supplier, the Scope 3 balance will be greatly improved.
5 – Enhance forecast accuracy
Planning professionals rely on accurate forecasts to make informed decisions. SCRM helps by providing data on potential risks that could impact supply and demand. This means you won’t be caught off-guard by unexpected shortages or surpluses, allowing for more accurate and reliable planning.
6 – Support better network planning practices
With information about your network risk, vulnerabilities, and opportunities, planning professionals can leverage SCRM insights to make better decisions across all aspects of the supply chain – from selecting responsible, sustainable sourcing partners, to optimizing routes and decreasing logistics costs.
By enhancing forecast accuracy, improving decision-making, increasing resilience, boosting collaboration, reducing costs, enhancing supplier relationships, and enabling agile responses, SCRM ensures that planning professionals are always a step ahead.