The Risk Of Failure In The Supply Chain Industry

July 01, 2015

The sheer number of variables which spell success for a supply chain industry can also lead to its failure by simply refusing to act when required. With growing diversification of products in a list of c store distributors, that are required to meet customer demand makes supply chains critical to the success of business. In current business scenario very few companies have remained successful by catering to local requirements, most source their products from across the globe and also cater to international clientele.


The supply chain industry, with a long list of convenience store distributors, now extends across international boundaries wherein every small weak spot creates a new risk of failure. While globalization has increased opportunities for business it has also opened up new vulnerabilities which are not limited to natural disasters and political upheavals.


Challenges to supply chain industry – According to risk management association Airmic, firms in a globalized market are placing their reputation and financial security in the hands of unknown suppliers who may or may not be trustworthy. To cut costs companies are compromising on quality and supply models to take risks which can end up in public relation disasters if suppliers do not understand their business policies. Here are few common challenges faced by supply chain industry:


Offshoring business practices – Several firms have burnt their fingers when trying out offshoring practices as they did not study local challenges of language and work culture.

Complexity and cost pressure – Supply chains involve multiple entities which work in coordination with each other to make it work and if these are too complex and others in the chain do not understand each other’s utility then it can lead to problems in the future. Global supply chains are both complex and expensive in current scenario of fluctuating currencies where exchange rates does not hold good for everyone.

Communication and rapid changes in production methods – Technology in today’s industry is changing at a fast pace with internet providing a common platform for people to share ideas and experience with each other to improve their situations. While internet is bringing a positive revolution in political scenario it is changing manufacturing and supply industry at an equally fast pace. Trends and tastes are catching on across the globe within days with mobile applications and convenience store chains are struggling hard to keep up with them.

Global supply chains are fragile and are vulnerable to risk but their importance cannot be denied in markets of today. Though firms have tried to integrate risk management into the structure it has been limited to small risks and operating models have paid scant attention to financial risks. Large multinationals with adequate financial resources are able to manage their global supply chains efficiently as they lay emphasis on sharing risks with local suppliers and select partners after conducting through checks about their business backgrounds.
Technology savvy companies have been able to create customized software solutions to manage their supply chains which can identify vulnerabilities and weak links. This will help the supply chain facilitators to remain prepared for disaster management and eventualities so that when these situations do occur alternatives can be arranged to ensure that everything goes as usual and supply chain does not get disrupted. Disruption in supply chains can lead to reduction in company revenue and market share. These disruptions can cause damage in customer credibility and also with stakeholders which can play havoc with your finances.


How to manage supply chain risks – Companies keen on expanding their business territory to retain their competitive edge in the industry need to manage risks that come with globalization by making necessary arrangements to mitigate these losses. Here are the following precautionary steps that firms can take to reduce supply chain risks as follows:

Preventing disruption of supply chain – Statistical data analysis can measure and improve performance of supply chain operations to reduce quality disruption issues. This data should be based on past problems which have caused problems so similar issues in future can be handled without causing any disruption in supply chain. Convenience store chains can remove these risks in supply chain by identification of key products which help them maintain business and locations of supply chain which will help them to put necessary measures in place to remove chances of disruption.

Global sourcing for risk minimization – Though globalization has increased supply chain risks it also provides opportunities to manage costs and carry on operations in an uncertain economic scenario. Companies which have managed to understand local work cultures of offshore locations carry out their production activities in these areas by using local workforce and resources to sell into local markets and also export to near locations.

Controlling supply chain – Every business is exposed to risks which is dependent on its operations i.e. the larger a business the greater are its risks. A small single convenience store or grocery store will have lesser risks with regard to supply chain as most of its business is suppliers are located within the state and it can manage with alternative suppliers if one fails to deliver. Large convenience store chains and grocery store chains which have operations spread across the nation and even overseas may take the help of local franchisees to manage business. To manage their national operations they can employ technology and communication measures to integrate supply chains and inventory to guard against disruptions.

Both small and large businesses continue to look for new business opportunities to improve profits and meet customer demand for wider product choice which is increasing their risk levels and exposing them to political and economic turmoil and natural disasters. A recent survey carried out after a spate of natural disasters struck the nation showed that only 33 percent are prepared to handle risks while larger ones are more prepared due to their past experiences. Employees traveling abroad with company data on their laptops and smartphones pose risk of data breaches which is disregarded by companies seeking to expand business overseas. It is now obvious that smaller firms are more vulnerable than large ones to supply chain risks and have to learn from others experiences to help them become better prepared.