Increasingly, large multinational firms, in an effort to simultaneously provide local responsiveness and global integration, are developing complex, differentiated supply chains, which increase the likelihood of disturbances.
The complex and dynamic interactions between supply chain entities leads to considerable risks that can propagate up and down the supply chain – adversely affecting performance. Such risks can significantly reduce operational performance, profitability and shareholder value over the long term.
More specifically, risk factors (i.e. those factors associated with uncertainty and disruption) are increasingly important considerations. In this blog I will outline the major risk factors, which I have observed and help our customers encountering them from a NUNNER Logistics perspective.
1) Supply Risk
There are several supply chain risks involved with working with other companies especially in supply chains where there is high dependency on other firms. These supply chain risks can vary from a supplier going bankrupt to not delivering the right quantity of a certain product on time. There are several ways to reduce this risk including having a comprehensive on-board and monitoring process, working with certified suppliers and having a good KPI system in place with the supplier.
2) Demand Risk
There are a variety of factors that can affect demand, this includes the economic state and other variables, and this is a risk for the supply chain. The more unpredictable demand, the harder it is to know how much to produce therefore it is important to have a comprehensive demand forecasting system in place in order to minimise the risk of producing too much or too little. With more stable demand forecasts the supply chain risk is reduced. A classic example will be dealing with ‘bullwhip effect’
3) Process Risk
Unforeseen and/or random interruptions that significantly affect operations, e.g. machine breakdowns, labor problem, process reliability, quality defects are most common process & manufacturing risk. Better planning and deploying preventive maintenance methods can minimize this process risk. However, it is very difficult to eradicate them fully, and it is inevitable to airfreight to meet customer demand or other backup solutions NUNNER has in place.
4) Decision Complexity Risk
Uncertainty that arises because of multiple dimensions in decision-making process, e.g. multiple goals, constraints, long-term plan, etc. This could also happen in due to size and complexity of big organisation or imposed by customer. In complex situations we always intend to at forefront to help customers and make the logistical transaction as swift as possible.
5) Natural Uncertainties
The natural uncertainties can be caused by earthquake, floods, non-deterministic chaos, etc. In our business we face these disruptions every so often. Due to our network and reach we have helped our customers to find a way to get them supplied as quick as possible.
6) Cultural & Geopolitical Risk Factors
Issues of trust, bureaucracy, corruption, ethics, etc. leading to misunderstandings and different set of expectation. The way we do business in Europe is different in China, India or Middle East. We have to learn to respect the cultural differences that affect business transactions and be more diverse and inclusive.