Supply Chain Risk Blog Series#2: The Impact of Complexity & Role of Contingency Planning

In the first of our blog series on Supply Chain Risk, we identified a number of different types of risks that especially expose the supply and demand chain to weakness; data quality, visibility, compliance & people. We now focus on the impact of complexity and the role of contingency planning in managing risk.  

Complexity automatically increases risk and, as supply chains grow more complex, the level of risk increases.   

Where a supply chain is very simple – goods are made in a factory, warehoused very locally and transported to a customer down the road – maintaining visibility and control over the goods is easy and the risk is relatively small.  However when components are sourced from around the world, into a manufacturing facility in another region for production with the finished goods then distributed into multiple warehouses in different locations in the world, potentially for further local customization and finishing…the supply chain becomes much more complex and so does the risk.  The likelihood of failing increases significantly; failure to satisfy a customer, failure to meet compliance requirements (both corporate and legislative) and ultimately failure to meet our own business performance goals.   

Sometimes factors that affect this are completely out of the supply chain team’s control, such as the recent global financial crisis or the impact of natural disasters such as earthquakes, volcanic eruptions and tsunamis. A well-managed supply chain will assess the risk in the global change and utilize the solutions they have to reconfigure in reaction to the change, remodeling over the short, medium or long term to reduce any inherent risk. However this rapid reaction can only be achieved with the correct supply chain processes in place, backed up with effective supply chain execution software.  

So how can companies assess their exposure to risk? Carrying out scenario testing will assist in exposing areas of weakness or potential failure. Leading supply chain software vendors including Kewill are increasingly developing their solutions to be able to assist businesses model potential risk situations and potential responses so that these can be documented into response and recovery plans depending on the situation. 

What can companies do to mitigate risk in the supply and demand chain? Selecting a solution partner that brings a people, process, systems methodology to the table allows you to ensure you have the right people, with best practice processes supported by industry leading applications to reduce the potential impact of any supply chain risk. 

What kind of tools can help in the risk mitigation process?  While customs and trade compliance software plays the most obvious role in risk mitigation, look for supply chain solutions, including TMS/WMS/freight forwarding software, that ensure standard processes can be set up (and easily changed as necessary) and enforced, removing the potential to operate outside of business, industry or government set boundaries, such as the Kewill MOVE multimodal transportation platform. 

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