Methods Matter in Supply Chain Risk Management

Author: Rene Garcia


Costly disruptions in the supply chain can affect any organization at any time, and these incidents can cause irreparable damage to the brand. While lost sales can be quantified, loss of reputation can be incalculable; that’s why supply chain disruptions have doubled as a leading concern when compared to other risk management issues. As such, organizations must establish a solid procurement process when forming partnerships and building their supply chain. Companies that work with high-risk suppliers must take extra care or stand to lose both reputation and revenue. As an example, in 2015 retail company Target announced that they would pull out of the Canada market completely due to mismanagement in their supply chain which caused an inventory pileup of Barbie SUV toys. Contractors mismatching barcodes resulted in more inventory staying in the warehouse instead of shipping, ultimately costing Target two billion dollars.

Obsolete Supply Chain Logistics Management

For many organizations, the procurement process has been managed manually, checklists and spreadsheets vs a dedicated SCM software solution. Contractors, suppliers, and vendors must be thoroughly vetted before integration into the supply chain. Are they qualified? Do they carry the proper insurance? Do they have the right limits? Regrettably, instead of adopting specialized procurement and supply chain management software, these companies opt for a home-baked SCM system which only serves to add more risk to the supply chain.

A manual supply chain management system is not a good practice for several reasons. First, the administrative overhead is a barrier to the auditing process whenever a paper form must be scanned or data must be entered into a spreadsheet. Second, analytics are not integrated into a manual SCM system. Finally, too much time is wasted chasing down old files. Obviously, this practice cannot scale.

Another danger is that organizations don’t realize that logistics and supply chain management requires a holistic view of the network. Many companies will only vet tier one suppliers, ignoring distributors, carriers, ports, warehouses, and more. The supply chain can break at any point for any number of reasons. As such, every link must be vetted and their performance monitored should they fall out of compliance. For this reason, manual processes must be replaced by supply chain management software.

Information Technology in Supply Chain Management

Depending on the scale of the supply chain, the supplier vetting process can range from frustrating and disorganized to time consuming and unmanageable. Furthermore, an organization may not have the in-house expertise to properly vet every link. It is important then, when choosing a supply chain risk management solution to partner with a vendor that has real industry expertise.

Avetta’s supply chain risk management software helps businesses identify and mitigate risk within their supply chain through contractor prequalification, document management, auditing, employee-level qualification and training, insurance verification and business intelligence. Avetta offers a proprietary SaaS platform that is highly customizable and adaptive for businesses of all sizes, and is used by more than 50,000 customers in over 100 countries. This technology is supported by a team of experts with deep understanding of safety, supply chain and risk management.

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