Just-in-time inventory, outsourcing, and lean manufacturing are some of the best supply chain strategies to help your company cut costs. However, these strategies may hurt your supply chain if you’re not careful. Major disruptions, such as natural disasters, volatility in the commodities markets, or even political instability in foreign countries, can reduce your company’s revenue, inflate your costs, and damage your relationship with investors and clients. You can’t sell goods you can’t deliver. Supply chain risk may be the biggest threat to the well-being of your business and should not be ignored.
Companies should begin by re-evaluating their operating models to create a perfect balance between a stable supply chain and financial efficiency. Many companies have switched from local suppliers to off-shore suppliers on the basis of cost alone. This isn’t necessarily a bad thing, but it would be foolish to ignore the fact that an international supply chain could have an added point of potential risk for U.S. based businesses.
The benefits of supply chain risk management outweigh the costs. It can be more expensive to choose a supplier in a politically stable country than one in a developing nation. It can also cost a lot of money to build or lease a backup operations center, buy insurance, or invest in property loss prevention measures. It’s a high-risk world. Companies that don’t invest in an enterprise-wide supply chain risk management program are walking a thin line—if they fail, even once, it can have a disastrous effect.
CPO Planning Guide reports that the average cost per exposure to problems of supplier capacity can be $62M. For supplier insolvency, it’s $8M. For political risk, it’s a whopping $406M.
At Avontis, we take supply chain risk seriously. We can help you design and implement the appropriate supply chain risk management solution for your company. We use scientific methodology, proprietary technology, and operational superiority to help our clients. Find out how we can help you – contact Avontis today.