Question

Why Risk Management is important in the Global Supply Chain (even in the non-globalized)?

Answer 1

Risk Management is important in the Supply Chain because:

• We generally associate risk as something which brings negative output for our business but it may not always be the case. Consider a situation where the demand of your products goes up and due to non-support from your suppliers you are unable to meet the demand and the brand image of your company goes down. Situations can be any either positive or negative from your perspective but you need to have plans in place in order to overcome those situations and risk management if done properly helps you counter such risks.
• As we know today the business environment is globalised, products are designed in America, manufactured in Taiwan and are sold in India. In the same way the supply chain has no boundaries now raw materials are imported from China, products are manufactured and sold in the US. There are now countries involved in the supply chain and the trade relationship among countries are volatile. If we do not plan for such unforeseen circumstances such as US-China trade war then our entire business operation may be hampered.
• Companies have become dependent upon single big suppliers and the quantum of business has grown manifold, the dependency upon single suppliers have also created a demand for the risk management in supply chain either it is global or non-global.
• There are certain products such as Petroleum products, radioactive metals whose suppliers are limited and if you are a customer of such products than you should arrange for risk management.
• The heightened competition in the market has also created a need for risk management in the supply chain as there are chances that the supplies are limited and your competition have purchased all the supplies in order to create an obstacle for you.
• Also the traditional hurdles of supply chain such as your supplier might have a fire or a strike, there might be an earthquake, an important shipment might get lost etc. also calls for effective risk management practices in supply chain at your business.