The Risks Faced by the Global Supply Chain

The Risks Faced by the Global Supply Chain

The risks faced by the global supply chain increase substantially due to the current changeability in the world in which new technologies and strategies are developing at a furious pace, and the situations that nobody predicted often happen. The most unpredictable and serious risks are those connected with natural disasters because they are neither effectively anticipated nor quickly solved. Unfortunately, it is very difficult to prepare for mega-disasters, such as hurricanes Katrina (2005) or Andrew (1992), because there is little experience to draw on (Simchi-Levi, 2008). Commonly, it takes time to rebuild the economy in the suffered regions which negatively influences the supply chain of a company. Such events cause long-term difficulties for companies because the consequences influence the purchase power of the customers in a negative way. The examples of such emergencies are the Thai flooding or the Japanese earthquake. In particular cases, such factors as terrorism, pandemics or problems with data security also impose a risk for the supply chain.

The first way to mitigate the risks is to look at supply chain on the whole, not at its parts. The supply chain manager must realize that although the chain faces risks and breaks on one particular part, it influences the entire process of supply. The next step is to review the company’s operating model which presupposes managing and reconsidering all the supply chain risk inventories. Then, it is necessary to use advanced up-to-date modeling tools to make launching a new product or opening a new market more predictable. This will reduce the costs of losses even if the risks come true. Finally, it is important to improve risk reporting and management. This can be achieved in various ways, for example with extra training of the responsible staff.

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