The Importance of Supply Chain Risk Management

The global electronics supply chains have been hit hard this year – pressure was already piling on with increased demand and longer lead times for certain components and this has all been compounded by the COVID-19 pandemic.

As we explored in our previous blog, COVID-19 has had a major impact on electronics manufacturing across the globe, with labour shortages, challenges to maintain a safe working environment and transport restrictions.

In light of the COVID-19 pandemic, we take a look at why supply chain risk management is essential and cannot be overlooked.

Why does supply chain risk management matter?

The pandemic has exposed supply chains to vulnerabilities, as an issue with just one link in the chain is going to disrupt the entire proceedings. Overly long and complex supply chains where not all suppliers are clearly mapped have been hit hard as disturbances to the ‘lower levels’ of the supply chain, which are vitally important, have a ripple effect throughout.

It has become clear that risk management for situations like these is essential. Having a fully mapped out supply chain, with protocols and contingency plans in place for any issues that you may experience, will ensure that the supply chain disruption isn’t as severe as it could be.

What should manufacturers consider for risk management?

Diversity

One of the most important things to consider when it comes to risk management is the diversity of your supply chain. Exposure to disruptive events can be minimised if supply chains are diversified across different countries and different companies so that you are not solely reliant on one location or even one supplier when it comes to vital electronic components.

Flexibility

On a similar note, it’s also extremely important for manufacturers to have a flexible and adaptable approach when it comes to their supply chain. You might have relied on the same suppliers and processes for many years but a major disruptive event like COVID-19 can put you in a difficult position if you don’t have contingency plans in place and alternative options available.

Quality

It’s also important to note that at times of crisis, it can be more common to see low-quality or even counterfeit components in the supply chain as people look to take advantage of a disrupted situation. Our motto at Delta Impact is that maintaining the integrity of the supply chain is paramount, which is why you should always ensure that components and products adhere to full quality assurance (QA).

Cash flow

Another element of supply chain risk management is the financial aspect. When a disruptive event hits, financial results may well be impacted in a significant way, so again it’s important to have the proper plans in place. Internal evaluation of your assets, sources of liquidity and cash reserves will help you build up a bigger picture for cash flow management.

Going digital

The COVID-19 outbreak has also reaffirmed the importance of digital evolution in the supply chains. Data analytics could help streamline decision-making processes such as supplier selection, and administrative and shipping processes can be automated through the use of artificial intelligence and the IoT. Robotics might also be the key to unlocking further potential here.

Related article: Artificial Intelligence in Supply Chain Management

Hopefully you have found this article on the importance of supply chain risk management useful. You can view our electronics supply chain solutions, where we assist with proactive supply chain management and vendor tail reduction.

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The Importance of Supply Chain Risk Management

In light of the COVID-19 pandemic, we take a look at why supply chain risk management is essential and cannot be overlooked.

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