Embracing Risk Management: The Path to Supply Chain Resilience

Unlocking supply chain resilience: harness risk management, streamlined payments, and innovative logistics

Summary: This article explores the strategic importance of supply chain risk management, optimized supply chain payments, and efficient logistics payment methods in enhancing operational efficiency. It provides insights into how businesses can better manage supply chain costs, quantify the impact of disruptions, and strategically invest in risk management for market differentiation, with a focus on building resilient and efficient supply chain networks.

In the face of substantial upheaval and losses brought on by the COVID-19 pandemic, an unexpected 37% of executives in risk and compliance, logistics, IT, procurement, and operations roles at large US firms point to budget constraints as a hurdle to fortifying their defenses against global supply chain disruptions. Yet, these very executives highlight the importance of enhancing supply chain risk response (49%), ramping up automation (46%), and improving end-to-end supply chain visibility (45%) as key elements of their strategy to boost supply chain agility. To justify the necessary investment, CIOs need to think strategically.

WAYS TO BETTER MANAGE SUPPLY CHAIN COSTS: 

Implement the Right Payments Stack: With the right payments platform, businesses can more cost-effectively accept and disperse funds across borders, limit fraud and reduce foreign exchange costs and risk. Technologies like virtual accounts allow the creation of accounts that function like local bank accounts and use local payment rails, and fintech-as-a-service payment networks offer payments and payouts globally from a single provider. With these tools in place, Logistics companies can reduce the costs and risks of sending and receiving funds cross-border.  

Quantify the Total Cost of Supply Chain Disruptions: Interruptions in the supply chain can inflate costs as companies clamber to expedite or restructure various activities across diverse functions for recovery. An astonishing 80% of less mature companies reported an increase in total supply chain costs, in contrast to 52% of more developed companies. Exposure to supply chain risks can manifest in numerous ways, including delays, disruptions and cyberattacks.

Strategically Invest in Risk Management for Market Differentiation: Successful businesses recognize that a crisis can offer a chance to establish a fresh competitive stance. Regrettably, 57% exhibit reluctance in exploring and adopting novel technologies. To sidestep similar pitfalls, it’s crucial to assess your supply chain enhancement projects from two perspectives: the expense of the investment contrasted with the length and intensity of the crisis.

Build Resilient and Efficient Supply Chain Networks: Modern supply chains operate with high efficiency, capitalizing on low-cost sourcing and mass transportation to offer competitive unit costs. However, they present a variety of risks to shareholders and customers due to escalated transportation costs, markdowns on obsolete inventory, or instances of stock-outs. CIOs can alleviate risk and aid businesses by designing supply chain networks that blend just-in-time efficiency with just-in-case robustness. By merging “just right” supply chain strategies, companies can deliver value for their customers that balances cost with service.

Assemble and Empower a Cross-Functional Supply Chain Risk Team:

Supply chain risk management often lacks a central owner and typically does not have a consolidated view even at the executive level. Risk management is a top-down approach that depends on executive backing and an appropriate incentive framework. The onus is on the CEO to contemplate all risks and relay them to the board. A dedicated team for supply chain risk and resilience should be established, one that is cross-functional, equipped with the skills to conduct risk evaluation and analysis and vested with the authority to take action. Teams dedicated to Supply Chain Risk Management (SCRM) must be given the autonomy to respond and should operate across various functions.

Simplify the Supply Chain: The length and intricacy of a supply chain can escalate the risk associated with it. Unwarranted complexity could stem from an overreliance on inexpensive foreign labor or providing an excessive array of product choices to customers. In a post-lockdown business world, simplification has become a guiding principle of supply chains.

Proactively Prevent Supply Chain Bottlenecks: Every supply chain encounters obstacles, be it overcrowded ports or restricted production capacity for a vital component. To safeguard against disruptions, CIOs must consider the data and applications their enterprises need to build the right protection for each bottleneck. They should also adapt business models to accommodate risk uncertainty and explore options to enhance resilience.

THE FUTURE OF SUPPLY CHAIN MANAGEMENT

The future of supply chain management lies in the intersection of risk management, supply chain payments, and logistics payment methods. By simplifying supply chains, preventing bottlenecks, and implementing the right technology stack, businesses can not only weather uncertainties but also seize new opportunities. This strategic approach to supply chain management enhances operational efficiency and drives business growth and success in the long term.