The Secret to Risk Mitigation in Your Supply Chain: Collaboration With Your Suppliers

In our modern world, risk in the supply chain is an inevitability. Whether it’s delays, natural disasters, or supplier issues, global logistics has become too complex to avoid issues completely.

Instead of focusing on eliminating risk entirely or ignoring it, it’s better to develop risk mitigation strategies. The secret to successful mitigation and management of supply chain issues lies in collaborating with your suppliers. It’s time to change how we approach risk in our supply chains.

5 Ways to Partner With Suppliers and Manage Risk in Your Supply Chain

The goal is simple, but getting there is anything but. Procurement managers want efficiency, reliability, and strategies in place for any drops in productivity. It’s easy to say, but without the proper planning, even a small issue can have a ripple effect across your supply chain.

Here are five tips that will help you work together with your supplier to ensure nothing catches you off guard.

1. Start With You and Your Supplier’s Risks

The first step is to face the problem head-on. Look at your business and your supplier and take note of any areas where risk is present. Start building out scenarios where things like a natural disaster or a shortage could affect elements of the business.

To spark this conversation, you could also look at your supply chain from a big picture perspective. Ask yourself questions like these:

• Which suppliers do you depend on the most?
• How many tiers of suppliers do you work with?
• Do your suppliers have their own risk management strategies?

These types of questions will bring to the surface any hidden risks you may not be considering in your strategy. It’s impossible to identify every possible risk as they range across too many factors. Even things as small as compliance or geopolitical instability can cause issues.

It’s also important to consider the fact that suppliers have different risk factors, so there’s not going to be a one-size-fits-all solution here. You need to approach suppliers with a flexible mindset to achieve the most effective strategies.

All of this comes down to a critical component of collaboration, which is communication.

2. Communicate Constantly

Conversations with your suppliers should not be a rare occurrence. If you wish to establish a long-lasting relationship with your suppliers, you need to open channels of communication, which will in turn encourage collaboration.

In the event of an issue, if you have a rapport with your supplier, they will be far more likely to reach out to you before it becomes a larger problem. Timing in these types of situations is crucial.

3. Develop a Shared Strategy

With an understanding of the risks in your supply chain, and a strong communication channel with your supplier, you’re ready to develop a mitigation strategy.

While many will immediately flock to the financial implications of a problem in the supply chain, taking a narrow approach like this is a mistake. Instead, consider the procurement, logistics, compliance, legal, and financial perspectives all at once.

It’s also important to have your own internal criteria for new suppliers. Assessing their abilities and risk potential via customized assessments will help you understand their business as much as they understand your own.

When you’ve developed plans for risk mitigation, it’s also helpful to have a shared storage for your data and documentation that both you and your supplier can access. This is where a supplier portal would make for easy collaboration on a shared software.

Finally, your strategy should include alternate sourcing strategies in the event of a total supplier failure. Contingency plans with other suppliers will ensure you have a backup plan in an otherwise no-win scenario.

4. Revisit Your Risk Scenarios Periodically

The most important thing to remember about risk mitigation strategies is the fact that they are not evergreen. Even the most ironclad planning becomes obsolete in our modern world.

As factors shift and change, you should establish plans to revisit your risk management quarterly to update any relevant data and adjust your plans accordingly.

Keep in mind that a variety of changes can necessitate the need to revisit your supplier’s risk strategies:

• Natural disasters can damage or destroy production facilities
• Changes in leadership
• New regulations or compliance updates
• Shipping problems
• Political unrest in the supplier’s geological region

Keeping your plans up-to-date will help you stay ahead of changes like these. It’s also a good reason to adjust your supplier assessments as well.

5. Leverage Powerful Technology and Tools

Today’s software solutions offer powerful ways to achieve better visibility and knowledge within your supply chain. By harnessing big data, collaborative tools, and predictive analytics, you can see issues coming before they arise.