The risks in a supply chain may surface while supplying some services or products to customers. This may result in terms of expense or delivery time. There are many factors due to which the supply chain faces risk.
Many techniques are there to identify the threat and act accordingly. Some of the significant risks are discussed below. Also, a few strategies that you may adopt are discussed.
The three types of supply chain risks are:
The risk from Natural Calamities
In front of natural calamities and disasters, the supply chains are powerless. This is one of the primary causes for which the services are disrupted.
Calamities like earthquakes, hurricanes, storms, floods, forest fires affect the supply chain a lot. Recently pandemic Covid 19 is also affecting the smooth flow of supply chains.
The risk from Humans
Humans may be equally responsible for harming the natural flow of the supply chain. Some of the risks from humans include cyberattacks, fire, piracy, terrorism, labor unrest.
Natural calamities are bizarre, but threats from humans are not that catastrophic. Professionals take even individual wrong decisions, some illness or injury, leave of key personals also fall under the risks from humans.
The risk from finance
Financial risk is one of the crucial troubles that the supply chains are facing amidst Covid 19. Due to worldwide lockdown, many supply chains stopped working. After the services got resumed, it also became a problem to gather proper financing. More or less, every business faced issues regarding finance.
The lack of raw materials also increased this threat. More money needs to be spent on the purchase of raw materials, increasing the cost of production. Delay in delivery also marred the prospect. Thus financial risk is hanging like a massive risk for the supply chains.
The risks faced by supply chains may be broadly included under two headings.
- Internal risks: Internal risks are threats like labor agitation, wrong planning, key professionals on leave, personal financial problems.
- External risks: External risks include natural calamities, socio-political upheaval, supply risks, global economic turmoil.
Strategy to manage supply chain risks
The strategy that may help fight the supply chain risks is to follow the PPRR model and be ready with a proper logistic proposal.
PPRR stands for Prevention, Preparedness, Response, Recovery. This model has emerged as an effective solution. It works as follow-
- Prevention: Devise precautionary measures beforehand. It will help you fight when the risk occurs.
- Preparedness: Always have a Plan B for every decision. This will work whenever Plan A fails or seems that it cannot be implemented.
- Response: As you face any threat, immediately respond according to the planned strategies. This will reduce the effect of the risk.
- Recovery: Start usually working as soon as you recover from the threat. Resume your work so that you do not require to face another risk.
- Logistics means a proper or reliable and effective plan during a crisis. Besides an emergency plan, have a solid blueprint about how to manage tough times.
Once the risk factors are identified and proper strategies still, you can always tackle it.
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