4 risk management strategies to ensure supply chain continuity

| 0 Comments

 

JimMakuwa.jpgA prudent supply chain professional knows that each transaction is worth its value or the negative impact of it going wrong and has to be treated as such.


High-value transactions need scrutiny commensurate with the risk that the organisation may be exposed to if something goes wrong. In other instances the transaction value may be intrinsic, but the effect may be devastating and it is for these reasons that one has a backup plan.


“It boils down to being inquisitive. Considering that risk is prevalent in supply chains, ‘What if’ can help prevent a fatal judgement error,” says Jim Makuwa, a tutor for Commerce Edge Academy, in this month's SmartProcurement.


The ‘4Ts’: four strategies for managing risk


1. Treat (or control) the risk


Complacency can creep in and negative issues may incrementally expose you to threats. It is possible to reduce such risks to an acceptable level by building control mechanisms into relationships or operational activities.


However, it is important that the strategies adopted are proportionate to the risk and are cost effective. Furthermore, if control measures are introduced it is imperative that the operation is not impeded by an over-controlling attempt to eliminate the risk.


A service level agreement is a good mechanism to ensure that the supplier’s performance is kept in-check and to identify when there is a need to take corrective measures.


2. Transfer (or share) the risk


Some risks can be transferred to another body or organisation through insurance, contractual arrangements, outsourcing or partnerships.


Realistically, transferring a risk is extremely difficult to achieve effectively and is often confused with action ownership (where the risk is owned by entity A - who feels the pain if the risk comes about - but action to mitigate or control the risk lies with entity B).


If the risk is transferred then care needs to be taken that the risk has actually been transferred. Recorded how and to whom the risk has been transferred (e.g. insurance).


Importantly, some risks (such as risk to reputation) cannot be transferred.


3. Tolerate (or accept) the risk


It is never possible to remove all risks entirely and all risks eventually have to be accepted as they form part of, or are inherent in, the activity under scrutiny.


There are some risks which we have no control over and some for which any management actions would be prohibitive in terms of resources. It is critical that these risks are identified, clearly understood and acknowledged, and a contingency plan established for dealing with the affects that will arise if the risk is realised.


4. Terminate (or avoid) the risk


Although unusual, it may be that a particular risk cannot be adequately controlled or transferred and the level of risk is such that it cannot be accepted. In this case the only course of action is to eliminate the risk by ending all or part of a particular activity.


However, management should tread carefully in such instances: while an identified risk may be too much to absorb, an organisation should not stifle innovation. Most innovative ventures are risky in nature because of the surrounding atmosphere of ‘unknowns’ and must be approached with caution.


Conduct further analyses to determine if they are lucrative.


Succession is key to risk management


Skill in risk management is not developed overnight: it is gradually learned through exposure to different circumstances and issues. Senior management should expose junior personnel to activities that reduce the exposure or threat to an organisation. It is necessary for the sake of continuity. Co-opt junior supply chain professionals in risk management committees so that they find their footing from experienced senior members.


However, while it does take experience to identify and act prior to the occurrence of a risk event, this does not imply that only senior managers can escalate areas of concern. It would be mindful, not to mention career expanding, for a junior professional to identify a risk that was overlooked by others.
 

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

Career opportunites

Operations Manager

  • >500 000 Gauteng Operations, Planning & Inventory Permanent Supply Chain
Our client within the FMCG industry with a ...More

Warehouse and Distribution Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
An exciting opportunity awaits for a Warehouse and ...More

Demand Planner

  • <500 000 Permanent
Get an opportunity to be part of one ...More

Procurement Manager

  • >500 000 Gauteng Permanent Procurement Management Procurement Officer / Specialist
An opportunity for a seasoned Procurement Manager, who ...More

Industrial Engineer

  • >500 000 Gauteng Industrial Engineer Permanent Procurement Consultant
An exciting opportunity that offers extensive exposure on ...More

Deputy Director: Procurement

  • >500 000 Contract Procurement Management Procurement Officer / Specialist Western Cape
Department of Economic Development and Tourism:Procurement Specialist, Ref ...More

DEMAND PLANNING MANAGER

  • >500 000 Gauteng Operations, Planning & Inventory Projects / Category Management
(Total Cost to Company R750k – R900K) excluding ...More

GLOBAL SUPPLIER PERFORMANCE MANAGER

  • >500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
(Salary: R 1.3M –R1.5M, dependent on level of ...More

GLOBAL CATEGORY MANAGER

  • >500 000 Contract Gauteng Procurement Consultant Projects / Category Management
Total Cost to Company R1mil – R1.2mil excluding ...More

Project Manager

  • >500 000 Contract Procurement Management Projects / Category Management Western Cape
 Description:A well-known retail organization is looking for an ...More

PROCUREMENT ANALYST

  • >500 000 Analyst Gauteng Permanent Procurement Management
Description:A leading infrastructure development group with strong presence ...More

Commodity Manager: Fuels and Lubes

  • Commodities Gauteng Permanent Projects / Category Management
 Ensuring continuity of supply in line with business ...More

Senior Facilities Manager

  • >500 000 Commodities Gauteng Operations, Planning & Inventory Permanent
(Total Cost to Company R800K – R900K) Johannesburg Our ...More

ENGINEERING STANDARDS MANAGER

  • <500 000 >500 000 Gauteng Industrial Engineer Permanent Procurement Management
(Total Cost to Company R350K – R550K) JOHANNESBURGYou ...More

Supply Chain Analyst

  • <500 000 >500 000 Permanent Procurement Officer / Specialist Supply Chain Western Cape
(Total Cost to Company R350K – R550K)  SOUTHERN ...More

Security Manager

  • <500 000 >500 000 Gauteng Permanent Projects / Category Management Strategic Sourcing
(Total Cost to Company R350K – R550K) JOHANNESBURG This ...More

Demand Planner

  • <500 000 >500 000 Operations, Planning & Inventory Permanent Projects / Category Management
(Total Cost to Company R450k – R550k, dependent ...More

Procurement Specialist-Randburg

  • >500 000 Gauteng Permanent Procurement Management Procurement Officer / Specialist
(Total Cost to Company R700k – R800k including ...More

Solutions Architect

  • >500 000 Gauteng Industrial Engineer Permanent Projects / Category Management
(Total Cost to Company R1.3Mil – R1.1Mil including ...More

MANUFACTURING MANAGER - OLIFANTSFONTEIN

  • >500 000 Gauteng Permanent Projects / Category Management
(Total Cost to Company R850k – R950K including ...More