As a small business owner, have you taken the time to consider the supply chain that is integral to the function and success of your business?
A supply chain includes the various vendors who provide you with materials, the producers who take those materials and use them to create products, any facilities where those products are stored, distribution services and retailers, as well as your own employees. That’s not an insignificant number of people and businesses that are involved in making your business work. Have you considered what would happen if something were to go wrong at any point along the supply chain and how that might affect your business?
To help ensure that your business is able to weather any supply chain issues, let’s examine some internal and external supply chain risks and then consider some strategies for managing those risks.
Internal risks are those that are typically easier to control because they exist within your business, as opposed to outside of it.
Some of the most common internal supply chain risks relate to the people and processes within your organisation that bear responsibility for producing the product or providing the service that is integral to your business. These types of internal risks include the following:
- Lack of contingency plans — this is where a business fails to have procedures in place to deal with possible issues if and when they arise
- General business risks — this includes high turnover, loss of key staff, problems with staff, inadequate reporting structures, a lack of clear processes and management failure
- Culture concerns — this relates to how well-equipped your business is to adapt to issues within the business (be they logistical or personnel related) and whether or not your business is open and honest about those issues or tries to sweep them under the rug
- Manufacturing concerns — this includes any kind of operations issue, especially the breakdown of machinery
- Failure to plan — this is similar to the first risk listed, but relates more to a failure to consider all of the risks that are relevant to your business and how you plan to minimise them and combat them
External risks are much harder to control because they involve people who don’t work for you and other companies over which you have no control. The most common types of external supply chain risks include the following:
- Business concerns — this includes things like whether or not your suppliers are secure financially and are being managed effectively
- Manufacturing plant concerns — this includes whether or not your suppliers have secure and safe manufacturing facilities that adhere to regulatory requirements
- Failure to deliver — this includes anything that prevents a supplier from getting a product to you, be it a physical disruption (like broken-down delivery vehicles) or a shortage of a certain product
- Environmental concerns — this includes factors that are subject to change, like social, economic and governmental issues that peak and fall (for example, terrorism concerns, changes of government and accompanying policy, inflation and interest rate rises)
Although a lot of those external risks might be out of your control, there are a lot of things you can do to help mitigate any losses that may arise as a result of internal and external supply chain failures.
Consider implementing the following where they may be applicable to your business:
- Get some partnerships in place — having some solid partnerships in place between your business and your suppliers adds a level of stability to the supply chain. Be selective about which businesses you enter into partnerships with, and make sure you do your homework and are certain they are companies that operate effectively and have a similar business philosophy to your own.
- Take steps to implement a positive company culture — consider investing in courses for your management team on how to effectively and positively manage those employees and processes for which they are responsible. It’s also worthwhile making sure effort and output are appropriately rewarded to ensure the people who work for you are committed to continuing the good work that helps to keep your business running.
- Be flexible — without an ability to adapt and change as the market requires, your supply chain can fall apart quite quickly.
- Make use of technology, but don’t be too reliant on it — there are so many technology-based options to help keep your business running effectively, but make sure you have ways to manage your business’s supply chain should the technology fail.
- Have a list of backup suppliers — it’s natural that you would have a list of businesses with which you prefer to work, but it’s also important that you have other businesses you know you can trust to step in should something go wrong with one of your preferred suppliers.
- Conduct a risk assessment — be sure to conduct a thorough analysis of where the risks to your business’s ability to function effectively lie and try to eliminate the risks you can and lower the risks that can’t be completely removed.
- Be regulatory aware — it’s important that all of the processes in your business adhere to regulations, but it’s also important that the companies in your supply chain are also committed to adhering to regulations.