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7 Risk-Reducing Supply Chain Management Techniques

By Avetta Marketing
March 15, 2021
8 minutes
Risk-Reducing Supply Chain Management Techniques

Take Control With These 7 Supply Chain Management Techniques

With supply chains becoming more complex, global, dynamic, and data-driven than ever before, it can be overwhelming to manage one effectively. Don’t worry, though—Avetta is here to help you not only endure the demands and uncertainties but thrive from them. 

The current environment is a prime time for implementing the following seven supply chain management techniques. Political, social, and logistical upheaval has marred the last year, and we can expect uncertainty to have a permanent place in our world. 

So get in there and finally take control of your organization's supply chain, from start to finish and at every link in between. Just realize, these supply chain management techniques are strongest when they’re done together. Rather than picking just one, it pays to take a wider look at how all seven of them relate to each other and to the whole. Only when all are applied can risks—both small and large—be radically reduced.

1. Work With Qualified and Pre-Vetted Suppliers

Conducting supplier prequalification before signing any contracts will ensure your picks have everything in place to provide what you need, without passing along any of the risk that you absolutely don’t.

Every supplier along the chain needs to have:

  • A properly executed and endorsed COI (certificate of insurance)
  • Indemnification
  • Limitations of liability
  • Accurate data showing financial stability

You may also choose to filter out suppliers who don’t meet your business continuity protocols, environmental policies, or anything else you deem pertinent.  

Additionally, maintaining current supplier records (to avoid a relapse in compliance) and collecting regular supplier assessment reviews (to affirm viability) is vital for lowering your organization’s supply chain risks. 

Having all of this in place beforehand will afford you the opportunity to build relationships of trust, especially when negotiating in risk-laden circumstances. 

2. Know Where Your Risks Hide 

You already know some of your risks because they are apparent, but there are always hidden risks that often go undiscovered until it’s too late. 

To help you find some of them, ask yourself these ten questions:

  1. Do we regularly request all safety statistics from our suppliers?
  2. Have any (and which) suppliers received regulatory safety citations this year?
  3. What is your safety manual auditing process?
  4. What is your supplier field-safety auditing process?
  5. What is your insurance validation process?
  6. How do we communicate updated policy changes to our suppliers?
  7. How long does it take for us to receive accurate COIs?
  8. Is it difficult to source new suppliers that meet our standards?
  9. How much do we know about our supplier’s financial and legal health?
  10. What areas of sustainability are important to monitor throughout our supply chain?

Here’s some advice—get a customized risk assessment report to root out any risks that are hiding out of plain sight. 

3. Don’t Be Afraid of Taking Risks

You don’t want to create a culture of fear. Yes, the reward for taking risks can be great, but the risks to your supply chain are real and potentially detrimental if they come to fruition. So how do you balance the risk/reward ratio? 

Here’s what to avoid when trying to strike a balance in your supply chain strategy:

  • Delaying difficult decisions
  • Refusing responsibility
  • Failing to confront problems
  • Trying to eliminate every possible risk
  • Having an overly restrictive approval process
  • Being unwilling to identify and utilize new sources or low-cost suppliers
  • Accepting or insisting on excessive procurement or inventory
  • Not securing best pricing because of required commitment levels 

Remember, one of the things that makes a world-class supply chain manager is an eagerness to take intelligent risks that have a generous payout in the end.

One example of this is when a manufacturing company competes in a difficult market and decides to take a risk using an equipment-as-a-service business model. It’s a new idea, but one that may become commonplace sooner rather than later. Therefore, if the risk is taken earlier than one’s competitors, being first to adapt can end up being a game-changer.

4. Prioritize Sustainability From the Get-Go

What should be a top priority for supply chain managers is both environmental and social sustainability. Unfortunately, many traditional supply chain practices hoist a sizable negative impact on communities and the environment. Now is the time for responsible, sustainable strategies to shift short-term and long-term goals into sharp focus.

Measures of improvement may include such things as:

  • Energy use
  • Carbon emissions
  • Industrial waste
  • Fuel consumption
  • The source of materials
  • Ethical employment practices

Consumers are demanding that their finished products come from companies that place high importance on where and how their goods are sourced, how employees are treated at every level, and what measures are put into place to protect our planet. So, strategize how to use sustainability principles in everything from design to delivery. 

5. Collaborate With Product Development

The days are ending for the separation between product development teams and supply chain managers. Collaboration is now the key to staying competitive and being quick-to-market. 

When working together from the beginning, new products can be designed with supplier prequalification, parts availability, trade barriers, and other astute procurement practices already in mind. All of this reduces supply chain risk and allows for accelerated innovations to be brought to market in record time, which, in turn, increases customer engagement.

Customer engagement is also a surefire way to reduce risks because it makes for brand loyalists, who are the envy of every organization. Loyalists trust their brand, tend to stick with it through thick and thin, and regularly promote it to others. This relationship reduces the risk of consumer flight at the moment a supply chain suffers its first hiccup.

6. Use AI to Predict Demand and Minimize Over- or Under-Buying

Demand-prediction capabilities of AI (artificial intelligence) are quickly maturing into a powerful tool for supply chain managers. They allow for real-time insights, accurate planning, automatic adjustments, and quicker actions. Also, demand prediction AI is also essential for highly flexible sourcing and distribution, especially when omni-channel ordering and fulfillment come into play. 

AI eliminates guesswork and manually culling data, too. With such high-level agility and adaptivity capabilities, AI drives operational speed faster and with more precision than ever before because of its cutting-edge predictive and cognitive nature. 

Risk is inevitably reduced through the good planning and adaptive adjustments that are made possible through AI’s capabilities.

7. Centralize Your Supply Chain Data With a Cutting-Edge API

To efficiently and effectively apply the above supply chain management tools and techniques, your organization can’t go it alone or by using piecemeal systems at every stopping point on the product journey. It’s just not feasible to make substantial improvements without implementing an API that integrates and streamlines systems across the board. 

AI and the cloud have made this possible by harnessing up-to-the-minute technology and applying it to:

  • Supplier compliance
  • Sourced materials
  • Inventory requirements
  • Reaction times
  • Delivered goods
  • Risk management
  • Data-driven forecasts

Proper plans that API techniques put instantly into place make the reduction of risk possible. A unified system enormously helps to reduce risk by providing broad and deep visibility for confidence in various scenarios and their multiple outcomes.

Reduce Risk With Avetta

Use these seven risk-reducing supply chain management techniques and choose Avetta as your partner to minimize risks both upstream and downstream in your supply chain.


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