What is supply chain risk?

The phrase ‘supply chain risk’ is one that is now heard in the news with increasing frequency. But what it is, how can it affect small businesses, and what should we do to manage it?

Supply chain risk is a potential risk to damage a business from an unknown problem within the supply chain. Essentially it might not directly be your fault, but you should have had procedures in place to check. Remember it’s always your reputation that could be damaged first.

Supply chain risk in Supermarkets & Fashion

Who can forget the media frenzy when horsemeat was found in frozen products like burgers and lasagne sold by the major supermarket chains. Our trust as the paying public in the organisations who supply these goods changed, driving the supermarkets to change their processes.

Since that  scandal in 2013 the way businesses manage and consider who is in their supply chain has changed. As a direct result, a number of supermarkets were forced to learn lessons on how they interacted with their suppliers. Roll forward to 2015, and a new debate food waste and the fate of ‘wonky vegetables‘ commences.

We are now much more conscious of where our produce has been sourced, the contents and the ethical nature of how it has been produced.

This in turn has meant that organisations and suppliers to the general public have needed to become much more open and transparent about production and sourcing.

For example, many consumers will look for the ‘red tractor’ mark on products to show that ingredients are sourced in the UK.

Of course, supply chain risk is not limited to food production. Remember the high profile cases where both Nike and Gap were found to be sourcing some of their products from suppliers who employed child labour . Both of these scandals had impact to both their brand and share price.

Are businesses doing enough to manage their supply chain risks?

So what does this mean for small business ?

Despite the increased publicity about supply chains many smaller businesses don’t pay much attention to supply chain risk. Decisions are made based on the financial aspects i.e the contracts and the payment terms.

Yet small business MUST scrutinise their supply chain in the same way as large business, in order to ensure integrity and resilience.

Supply Chain Risk and Cyber Security

As is becoming commonly aware, Cyber crime is the no. 1 risk to UK businesses with a huge rise in hack attacks as cyber-criminals target small businesses

We all rely on these businesses to correctly and securely manage our data. Internally we rely on our IT teams or outsourced IT providers to keep our systems and data secure. We place our trust in them, yet is anyone actually checking to make sure our information is safe?

Like the horsemeat scandal Findus trusted its supplier to provide beef for its lasagne products; a trust that was perhaps misplaced through a convoluted supply chain.

The risks in the Cyber world in the supply chain are high and it is impacting both small and high profile organizations as recently highlighted by Action Fraud when Michael Page job seeker details leaked online

What should business do about supply chain management?

For any business it is important to have an effective Supply Chain Risk Management strategy in place, especially if there are many complexities in your supply chain.

  • How do you chose your suppliers ?
  • What credentials are you seeking from them to ensure that they will:
    • protect your data?
    • your customers?
    • your ability to deliver?
    • protect your brand with as much diligence and care as you would ?
  • Is price the only driver in your selection process ?
  • Once chosen, do you continue to validate their ability to deliver to you ?

In the same way as Nike, Gap, and Tesco identified issues with their supply chain, the importance and need to continually revisit and test your strategy has also grown.

You must act to ensure your business is resilient in an ever evolving world.

So for 2017 perhaps your new Years resolution should be to revisit your Supply Chain Risk Management strategy!

What can we do to improve your supply chain risk?

We help businesses like yours think, protect and contingency plan against risk. We can help you balance the risks that pose a threat to your business and capitalise on the risks that offer opportunity.

If your risk strategy is out of date or as with many small businesses you haven’t got one then get in touch to find out how you can protect your business.

 

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