Six Cost Saving Benefits of Risk Management within the Supply Chain

RBW_Logistics_15-83005Manufacturing can be risky. The ebbs and flows of supply and demand commands a constant observation of forecasting and trends.

What happens after the product is manufactured?  Clearly the story does not end here, right ? How does the product get from A - Z ? It's a complex system of multiple divisions working in sync. This requires docking, transportation, warehousing and distribution.

BRAIN TEASER : I prefer to be wet. I gain my strength while taking a dip. What am I ?

This is Supply Chain Management.

What happens when that system breaks down? The order is not fulfilled. You lose revenue.
What if the warehouse that your product is stored in is destroyed by a hurricane? You lose revenue.
What if a major natural disaster strikes and wipes out your main transportation route ? You lose revenue.

What if a traffic accident delays the delivery time of the product? You lose revenue.
The movement of that product from point A - Z suddenly becomes more crucial than you first anticipated. You need to hedge your company against the risk against of not fulfilling the order. This is Supply Chain Risk Management. A good supply chain management plan considers all of the factors that can disrupt your supply chain, ensuring that a contingency plan is set in place.

Here is our story. We have a client that happens to be one of the largest tea distributors in the United States. We were able to help them improve their supply chain and manage their risk.

 

Here are the 6 benefits of Supply Chain Risk Management

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IGNORANCE IS NOT BLISS

How can a blind man see how to drive a car? Take off his blindfold. You can’t manage what you can’t see. Where do your raw materials originate? What locations they will have to pass through? Where your distributors are located and where your finished goods will travel? Analyze it. Criticize it. Simplify it. Otherwise, you will be the blind man driving the car with a blindfold on. The transparency of data is crucial. The devil is in the details. Document and tracking down to the smallest detail so that you can create a beautiful data mosaic.

WEAK LINKS BREAK UNDER PRESSURE

The strength of system is not at your strongest point. It's at it weakest point. Identify areas in your supply chain where you may have an excessive reliance on a infrastructure or antiquated technology. Create a risk profile that identifies where you are the most vulnerable and the severity of that risk: identify the likelihood of a problem occurring and understand your ability to implement a contingency plan. Case in point, our client used to warehouse their product in New Orleans. Hurricane Katrina touch downed in New Orleans washed away millions of pound of product into the sea. Re-Evaluate. Analyze. Criticize. As a result, the decision was made to move shop more inland.

THE VULNERABILITY ZONE ( TRANSPORTATION )

Most companies come up short in mapping the routes. Product in transit is in its most vulnerable state. Many factors can happen that are completely out of your control. So, why is the area that presents the most vulnerability given the least amount of planning and preparation ? Analyze. Criticize. Revolutionize. Excellence is found with the details. Review your routes daily. Be dynamic and flexible based upon the situation at hand. In a year, we began to work with our client to reassess their supply-chain. In our analysis we discovered areas of consolidation that allowed them to reduce their cost and stay competitive in their market.

FLUID COMMUNICATION

You need to be communicating before a crisis occurs, and throughout the occurrence. The integration of technology and management software helps tremendously in this regards. Another way to improve communication is by consolidating several steps into one. Find the simplicity in the complexity.

 

PROACTIVITY IS THE KEY TO PRODUCTIVITY

Have the best problem-solver on your team always focused on finding the “next” risky event. It is the constant improvement on the details that make the good companies great.

WITH GREAT RISK COMES GREAT OPPORTUNITY

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Supply chain risk can become an opportunity for creating a competitive advantage and differentiation.We have 1st hand experience in this. Our client came to us with the idea of blending their tea in our facilities. This would truncate their supply chain and improve: customer service, lead time, transportation risks, order- fulfillment time, the risk associated with transportation , and profitability. We had zero experience in blending tea before this. We took a huge risk. We were willing to be flexible and think differently. The opportunity made sense for both and as a result, became very profitable and solid business partnership.

 

ANSWER: I'm a tea bag.

Risk is unavoidable but the right perspective can turn risky business into successful business.

 Learn How RBW Logistics Can Solve Your Logistical Challenges.

Think beyond Normalcy. Excellence is found in the details.

 

Chadwick Heard

Written by Chadwick Heard

Brand Strategist| Technology Enthusiast| Logistics Professional

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