Why Risk Management is Important in Supply Chain Management

The supply chain has been in the spotlight for many months as the pandemic has unfolded, life has changed, and demands have mounted. There are a multitude of factors that can cause supply chain disruptions: congestion at ports, railyards, and storage facilities; labor shortages, disputes and strikes; weather; natural disasters; and financial situations. We witnessed the pandemic magnify the weak areas of the global supply chain, which has still not recovered from this tidal shift in our history. The risks during such a global event as COVID-19 have been as changing and fluid as the times, and yet, we must be prepared for them.

What is Supply Chain Risk Management?

SCRM or Supply Chain Risk Management is the identification, assessment, and monitoring of risk factors, plus the strategies that are deployed to reduce vulnerability and ensure continuity of service and profitability of business. A good supply chain risk management process begins with an identification and assessment of all risk factors, both those that are controllable and those that are not. Once the risks are enumerated, quantifying those risks is the next step. You need to understand their impact and determine the right amount of effort based on probability of occurrence and importance.

Once you have your list of prioritized risks, you work to mitigate those that are in your control. For those risks that are outside of your sphere of influence, you look for contingency plans and alternative strategies.

With all this planning in place, the final step is to monitor and respond. It is important to understand that this process is iterative, and you must continue to identify, re-assess and update mitigation plans and response actions. Risk management must be an ongoing process of reevaluation and self-improvement.

What Does this Mean for the Food Industry?

The food industry is responsible for producing, transporting, storing, and delivering goods to distribution centers all over the world. A properly functioning supply chain is critical to the delivery of food worldwide.

The Best Defense is a Good Offense!

Understanding your supply chain, your suppliers, your customers, and all the factors that can pose risk to the successful delivery of bulk food supplies from one part of the world to another is quite a challenge. Long-term relationships help foster long-term supply chain resilience. Being proactive with a good Identify-Quantify-Monitor-Mitigate-Response process that is constantly revisited and often updated is a great defense. It takes many years to build the knowledge, process, and relationships to perfect.

At Interra International, risk management is part of our process and our culture. We are constantly evaluating and mitigating risk, which makes us stronger.  Partner with us and you’ll find your own risk profile improves.  We help customers achieve diversification in the supply chain without having to take a risk on a new supplier, because we can ship products from all over the world.  If the supply chain is backlogged at one port—or one country—we can come up with alternative options for you out of a different port or a different country.  Similarly, we help vendors improve their diversification because we ship products to destinations all over.  Either way, work with us and we’ll connect you with the rest of the world, while reducing your risk.