What to consider for supply chain risk assessment


Every company should take a closer look at its supply chain with risk assessment in mind to gauge which areas are weak and may require more attention in order to uphold working order.

Given recent events that have disrupted the supply chains of many industries around the world, a Business Insurance report highlighted several areas that companies will want to prioritize when conducting an audit.

"While many expect global sourcing to become an even larger factor for businesses going forward, recent events are prompting companies to consider the geographic concentrations of suppliers … [and] the need for backup suppliers … should supply chains be disrupted," contributor Rodd Zolkos wrote for the news provider.


If addressed properly, focusing on the areas highlighted by Zolkos could mean the difference between the supply chain steaming ahead or grinding to a screeching, and often costly, halt. Here are more details on the factors all organizations should consider:

1. Geography

While global supply chains are growing, the regional diversity of certain industries is not. For example, according to Zolkos, 45 percent of the world's computer hard drive manufacturing is carried out in Thailand. That's having a major impact on the industry as a whole, as many companies there are still dealing with flooding of historic proportions.

Whenever possible, companies should ensure the supply chain is as geographically diverse as possible. Many areas around the world are vulnerable to natural disasters, but organizations certainly don't want to put all their eggs in one basket.

2. Backup plans

Ask any supply chain management professional and they'll tell you that interruptions happen and they are most often unavoidable. It's how a company prepares for and deals with such situations that will make the difference.

Zolkos argues that there are a number of backup plans companies should explore, including having alternate suppliers at the ready should primary sources go down, diversifying a partner community and utilizing different backup suppliers than the competition.

"People are also starting to do a lot more scenario analysis,” Linda Conrad, director of strategic business risk management at Zurich Financial Services, told Zolkos. That will allow for better backup planning, according to the report.

Research conducted by the Procurement Intelligence Unit revealed that 181 senior procurement executives at some of the world's largest businesses believe their companies will combine to lose more than $218 million because of supply chain disruptions during the next year.