Managing Supply Chain Risk by Benchmarking
Managing the supply chain is not without risks that can interrupt the flow of information and materials leading to bottlenecks in production, an inability to meet orders, lost sales and profitability. Risks tend to be categorized into either operational risks, network risks or environmental risks, each one threatening the optimized process flow within your organization. When you implement benchmarking, you can more effectively manage the risks within your supply chain.
Organizational Risks Included in Supply Chain Risk
Risks that challenge the effective operation of the supply chain can exist internally. This can include poor technology integration, lack of proper relationships with the members of the supply chain, poor metrics for measuring performance and a lack of proper costing methodologies to add value to specific supply chain processes. All of these elements present supply chain risk as they can contribute to the interruption of the seamless movement of the supply chain. When these issues emerge and stop the optimal flow of processes through the supply chain, they become true problems that hurt your bottom line.
Supply Chain Risk Includes Network Risks
Network risks are a supply chain risk that exists within the supply chain itself. These can include potential disruption in supply, schedules, inventory or delays in delivery. Changes in technology or a failure of a system can present a supply chain risk, while variations in demand and security risks are very real and can hurt the overall value of the supply chain. Security risks can include terrorism, counterfeiting, theft, infrastructure breakdown and even piracy. As a supply chain risk, any of these occurrences can stop the flow of supplies and products indefinitely.
Supply Chain Risk Includes Environmental Risks
You don’t always have control over environmental risks, which can make them even more dangerous than other risks. These risks may include labor costs, customs, exchange rates, economic shifts, a recession, shifts in government legislation, competitor uncertainties and a lack of human resources, capital or technology. It’s important to apply specific controls over those internal elements you can manage to mitigate supply chain risks, while also planning how to handle environmental challenges that can occur.
Benchmarking to Address a Supply Chain Risk
Keeping your eyes on your own paper won’t help you to mitigate supply chain risk. It’s important to learn what other companies in the industry are doing to protect their own supply chains and measure your performance against theirs. Benchmarking helps you to measure your actual performance and compare the results against top performing companies in your industry. Groups exist in this space to help you with the process, including Gold Certification, the SCOR (Supply Chain Operations Reference) model, ISO Standards and the Supply Chain Risk Leadership Council.
Mitigate Your Supply Chain Risk with Benchmarking
By implementing benchmarking according to industry best practices, you can leverage components to lay the foundations and organizational arrangement for the design, implementation, monitoring, review and continuous improvement in risk management. You can’t mitigate all risks and you can’t control the economy or the environment, but by implementing best practices established in the industry, you can learn from the mistakes and successes of others. Benchmarking provides the standards by which all supply chain risk activities must be measured to ensure you apply optimal optimization and protection for long term success.