Everyone has likely heard the saying “You’ve got to spend money to make money”. Whether it is investing in research and development or devoting capital to inventory, the ideal result for every dollar spent is to generate a positive return. While the direct path of spending towards products and services can be analyzed, tracked and determined, there are other avenues that don’t get as much attention, but are capable of producing a much greater financial benefit.
A risk mitigation strategy within your supply chain can uncover new efficiencies, but most importantly, it can prevent large costly mistakes and counteract damaging circumstances. Essentially, this investment doesn’t provide the same “cut and dry” return, but it can be monetized and measured. A recent report by Accenture shows that only 26% of companies consider supply chain risk mitigation as “important”. Furthermore, virtually all companies in the Accenture survey reported a positive return on investment (ROI) on their supply chain risk mitigation projects. To achieve similar results, here are 4 keys to implementing a risk mitigation strategy:
1.) Avoid paralysis by analysis: The wide spectrum of different threats and varying elements that can impact your supply chain can be staggering. Your risk mitigation strategy should focus on the critical aspects of your business, keeping in context with likely disruptions. Having a plan in place combat high potential risks will be the most effective course of action, and will provide a basis to withstand outlying disruptions as well.
2.) See the whole picture: Your ability to mitigate risk and navigate supply chain issues as they arise will be largely contingent upon your distribution and fulfillment operation. Whether that is an internal aspect of your business or outsourced, understanding the abilities and constraints on these processes is critical. Financial troubles and operational capacities can amplify a supply chain disruption if unaccounted for.
3.) Prioritize: As resources become scarce and external factors constrict your supply chain, prioritize the most important elements for your business into tiers. Instead of overextending limited resources by attempting to maintain every minute detail, compartmentalize and rank the essentials. Ensure that these tiers can be maintained through a disruption and that the appropriate technologies and processes are available to support them.
4.) Promote visibility: This is an element with your supply chain that can enhance performance and efficiency at any time. With a strong visibility platform, the ability to forecast disruptions and respond accordingly not only reduces risks, but streamlines your overall fulfillment operation.
While supply chain disruptions come in many shapes and sizes; storms, labor disputes, political strife and other factors, having the strategy and tools in place can dramatically reduce their impact. Focusing resources toward the most disruptive risks to your business by leveraging the expertise and technology of a 3PL can not only prevent financial losses but create ROI. Barrett Distribution Centers specializes in designing and implementing customized fulfillment and logistics solutions. For more information click below.