Bamboo Rose Blog | Global Trade Management

A more consistent performing supply chain starts with defining your risk threshold

The reality is that no company ever has total control of its risk. However, that’s not to suggest that they are completely powerless either. Defining what level of risk is acceptable to your operation and remaining within these parameters, no matter the situation, will lead to fewer interruptions and breakdowns in processes — and a more efficient supply chain.

 

As any supply chain head will tell you, what keeps them up at night is the fear of a catastrophic failure in their supply chain. Unforeseen events can quickly threaten to derail even the most competent operations. A good strategy to prepare for these scenarios is by first establishing your risk parameters.

 

Risks can manifest themselves in many ways —  compliance and regulatory issues, geopolitical concerns, pricing instability or natural disasters — the next crisis is often just around the corner. Predetermined risk assessments are important because they allow you to identify potential points of failure in advance and conduct a cost-benefit analysis. For example, your company may single source a critical material due to an advantageous price point. While this may fall within the acceptable level of your risk parameters, another company may find this potential risk completely out of the question, no matter the savings.

 

While it tends to have a negative connotation, some companies actually see risk as an opportunity to turn uncertainty into a competitive advantage. For companies that have an aggressive approach, they may be willing to assume higher degrees of risk for the potential of faster and cheaper supply lines. Companies that take a more conservative approach to risk may perceive more value in certainty and dependability rather than actual dollar savings in terms of speed or materials cost. What is important is finding the level that is appropriate for your business and culture and sticking with it.

 

Risk is a part of doing business, it allows for innovation and growth, and without it, a business will quickly grow stagnant. However, not all organizations should or do approach risk in the same way. First, understand your organization’s temperament for assuming risk and ability to weather various situations. This will allow you to develop a strategy that is consistent with the company culture and supports your supply chain effectively. Once your business has established a risk management strategy that works, it is critical to implement a process that ensures adherence across all business lines. As with any process, it is only truly effective when it is repeatable and actionable.

 

The most important element to operating a global supply chain is to establish a continuous operation. Understanding the risk factors involved and identifying how to limit their impact to your business is the first step in this process. Bamboo Rose can help you to better understand and overcome the challenges associated with your supply chain risks.

 

For more information on where Bamboo Rose can improve your efficiency on a global scale, please visit our global trade management solutions page.