Managing Risk in Your Global Supply Chain
Risk is an inevitability of any business, and when it comes to expanding your business abroad, the risk multiplies, thanks to its global nature and potential to impact your business financially. The moment you establish new suppliers outside what the business is used to operating within, risk increases simply due to the unknown.
For example, there’s risk from the longer lead times required when operating in a global environment, possible supply chain disruptions due to global customs and port congestion, instability in source countries – whether political, economical or due to natural disaster, terrorist attack or disease outbreak – and changes in exchange rates and economic health, to name a few. And then there’s the risk of quality issues; having a long, global supply chain, as is inevitable with the international expansion of business, and the holding up of capital in inventories.
While the risks of expanding into international market cannot be totally avoided, they can be planned for in advance by implementing a risk management plan. This will help to avoid disruptions down the supply chain that can help your business avoid deadlines, delays in time-to-market cycles, damaged reputation and, ultimately, affecting profit. It also helps to quantify risk as you outsource.
Loss of facilities
In the case of a natural disaster or equipment failure, a factory or distribution centre in your supply chain may have to close. Even if it’s only for a short period of time, this could have devastating effects when expanding business overseas. For this reason, it’s important to have a back-up plan that can be implemented at very short notice, which could involve substituting materials or products or using stock inventory.
One of the biggest risk factors with global supply chains is the potential culture gap with countries involved in your supply chain. Some countries, for example, are far more risk-averse than others. Therefore, it’s important to spend time getting to understand the cultural, and operational, differences of the countries across your supply chain. This will come in useful when negotiating through any problems further down the line, when the stakes are higher.
The more at stake, the more vulnerable a business is to security breaches. Across the supply chain, there needs to be common risk vocabulary and thorough due diligence for any new suppliers, ensuring their cyber-security competence, and making certain data sharing is of high priority for everyone involved along every step of the chain.
The risks that come with global supply chains range from the everyday to large-scale natural disasters. First and foremost, the most important task to ensure you keep global supply chain risk at a minimum is to choose competent, strong suppliers. This may take time, but there are other factors you can focus on, too, such as applying lean principles to compress cycle time variation and shipping time, cutting down and eliminating waste and delays wherever possible across the entire supply chain.
You can also use visibility tools to track global shipments and allow you to react as quickly as possible. Using supply chain event management technology, you can send alerts to the right people when something needs attending to at some part along the supply chain. And don’t forget: insurance. Cargo insurance, credit insurance, and any other insurance that helps protect your business and its global supply chain from the unknown.
Galvin International is on hand to help at every stage of global expansion, including expert assistance to mitigate risk along a business’s global supply chain. Get in touch with us to find out more.
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