The Dangers of Inadequate Supply-Chain Risk Mitigation

A supply-chain network design that doesn’t take into consideration supply-chain risk mitigation will be considered sub-optimal.

supply-chain security program, supply-chain risk mitigation

A supply-chain asset protection (SCAP) and risk-management program should include supply-chain risk mitigation plans that help decrease the severity of disruptions throughout the value chain and provide the analytical insights required to develop a flexible supply chain to support each 24/7 channel.

A supply-chain network design that doesn’t take into consideration supply-chain risk mitigation will be considered sub-optimal and can result in:

  • Excessive safety stock resulting in potential obsolescence, additional carrying costs, and sub-optimal use of working capital.
  • Over-reliance on costly airfreight logistics due to lack of flexible demand fulfillment.
  • Inefficient use of resources or capital applied toward one channel over another.
  • Supply chain disruptions of longer duration or severity.
  • Loss of sales (order cancellations) or increased cost of sales (expediting orders).
  • Damage to brand reputation resulting from unsatisfied customers.
  • Excessive spend of human capital and variable expense resources.
  • The ability to manage performance, cost, and risk becoming ever more complex as omni-channel businesses strive to meet the expectations of the modern consumer.

The evolution of omni-channel shopping is having a significant impact on how supply chains are designed, driving a greater need to understand cost-to-serve and to protect margin erosion as channels and SKU assortments increase. Demand fluctuations during seasonal peak or promotional periods are challenging and taxing on supply chains, requiring networks to be designed with greater flexibility and control.

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It is my humble opinion that consumer businesses should place an increased focus on transforming supply-chain networks to align with their omni-channel strategies. The harsh reality is that omni-channel is rapidly moving away from something to be considered to being a must-have for surviving and thriving businesses. The recommended approach is to embrace the new reality of omni-channel while also investing in more in-depth analysis on consumer demand and aligning supply-chain asset protection objectives with corporate strategy to create a competitive advantage.

For more on the differences between multi-channel and omni-channel marketing (and how a strategic program can provide a more streamlined customer experience along with improved asset protection), check out the full article: “Supply Chain’s New BFF—The Omni-channel Experience.” The original article was published in 2016; this excerpt was updated August 8, 2017. 

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