Assessing Supply Chain Performance Risks

     

The performance of a manufacturing company's supply chain is paramount to its revenues and profitability. The quicker an organization can introduce a product to the market, with the fewest issues possible, the less it will spend on the process and increase its chances of success.

Such goals are upheld through a supply chain management program. Still, there are numerous factors that can delay the process, or worse, bring it to a screeching halt. That presents the company with serious implications in terms of its ability to turn a profit.

 

However, the more a firm understands about risks to its supply chain, the better prepared it can be to deal with issues and resolve them in a timely manner. A recent report from African news provider News Day highlighted several common, yet serious, risks that manufacturers may face.

1. Natural disasters

If 2011 has taught logistics managers anything it's that natural disasters can have an overwhelmingly negative effect on the supply chain.

Take the recent Thailand floods, for example. The Southeast Asia nation serves as a hub of manufacturing for computer hard disk drives, accounting for about 25 percent of the world's output. And because many plants were essentially wiped out by flooding, analysts have already slashed their outlook for PC sales in 2012.

And earlier this month, the San Jose Mercury News reported that chipmaker Intel cut its outlook for the fourth quarter because of the damage done to its supply chain.

2. Financial issues

The importing and exporting of goods are essential aspects of many supply chains. Companies often look overseas for inexpensive products and labor in order to cut the costs needed to build a product.

However, the cost of doing such business can change with political and government influence, according to the report. This is most common in the form of tariffs. Companies will want to be sure they are prepared for any sudden change in fees and taxes they must pay.

3. Product quality

Getting a product to market as quickly as possible is all well and good, but only if the utmost in quality standards are upheld. Customers will turn on an organization that pumps out poorly made products.

The high quality throughout the supply chain can be achieved through greater collaboration among the company and its suppliers and vendors. Working together will foster a strong relationship, experts say, and get both sides working toward the same goal of practicing a highly effective supply chain.