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Supply Chain Risks and Mitigation Strategies

The global supply chain is a dynamic and intricate system, essential to the smooth operation of trade and commerce. In an era where consumers have grown accustomed to the convenience of rapid, reliable access to a vast array of goods, the intricate journey of these products from manufacturing to doorstep often goes overlooked.

The COVID-19 pandemic thrust supply chain management into the limelight, revealing the critical need for robust risk mitigation strategies and bringing to the forefront the once-invisible threads that connect global economies.

Drawing upon the extensive knowledge of Amy David, PhD, clinical professor of management at Purdue University, we delve into the complexities of modern supply chain risk management.

The Pandemic's Impact on Supply Chain Risk Awareness

Before the pandemic, supply chain disruptions were often viewed as isolated incidents rather than systemic risks. The pandemic changed that perception, highlighting the interconnectedness and vulnerabilities of global supply networks.

The pandemic also brought the topic of supply chain to the forefront of national conversation.

"Prior to the pandemic, people who weren’t involved in supply chain or manufacturing had never really given much thought to all the steps involved, exactly where things come from and what the disruptions can be," David says.

“The pandemic raised awareness about how supply chains work and the potential fragility of the system. Now, it is quite clear that supply chain risk management must be an integral part of any business strategy, as disruptions can have cascading effects on global trade and economies,” she says.

Learning from Disruption: Post-Pandemic Lessons for Businesses

The pandemic was a stern teacher for the business world. It taught that resilience is not just about surviving the present but being prepared for the future. Businesses have learned the value of having contingency plans, the importance of diversifying supply sources and the need for investing in digital transformation.

These lessons have led to a reimagining of supply chain operations, with a greater emphasis on flexibility and strategic planning. "Right now, a lot of companies are investing more in supply chain redundancies,” David says. “This can mean additional manufacturing capacity and looking at suppliers that are closer, even though that might be more expensive than an overseas supplier."

Beyond COVID-19: Understanding Common Supply Chain Disruptions

The pandemic is but one of many potential disruptors to supply chains. According to David, others include:

  • Natural disasters: Hurricanes and earthquakes can halt production and logistics.
  • Geopolitical tensions: These can lead to trade embargoes and sanctions, disrupting supply routes.
  • Technological failures and cyberattacks: These can cripple ordering systems and data flows.
  • Economic shifts: Changes in the economy can alter supply and demand dynamics.

Recognizing these threats is the first step in preparing for them.

David emphasizes that there is really no way to fully predict or avoid disruptions. The real goal is to understand this reality and be prepared when the inevitable happens.

“There will always be natural disasters,” she says. “And there will always be geopolitical instability, but what is your plan for when these happen?"

Successful Supply Chain Risk Mitigation Strategies

In response to these varied risks, businesses can implement several proven mitigation strategies.

“When teaching supply chain risk management, it’s important that we examine what those risks could be and think about how we make decisions now that are good in the long term," David says.

David states that this can mean different things, from getting in front of problems and redesigning your supply chain to employing a “wait-and-see method” along with a backup plan that can be activated quickly.

8 Supply Chain Risk Mitigation Tactics

  • Diversifying supplier base to avoid reliance on a single source
  • Increasing inventory levels to serve as a buffer during disruptions
  • Developing flexible transportation options to adapt to changing logistics needs
  • Establishing strong relationships with suppliers for better collaboration and risk sharing
  • Conducting regular scenario planning and stress testing for preparedness
  • Creating strategic stockpiles for critical goods
  • Engaging in industry alliances to share best practices and resources
  • Encouraging local sourcing to reduce transportation risks and improve supply chain agility

Technological investments, particularly in AI and blockchain, also play a key role in supply chain management.

“Technology has improved tracking, forecasting and security across supply chains,” David says. “Supply chain mapping has provided companies with a clear view of their supply chain, allowing for the identification of critical nodes and potential points of failure.” David stresses that while technology provides us with more visibility and information, it’s just a tool. It is up to informed and educated humans to make critical decisions. This places the health of our supply chains and economy on the shoulders of professionals who understand the challenges along with what’s at stake if something goes wrong.

Earn an MBA With a Specialization in Global Supply Chain Management

The evolution of supply chain risk management highlights the resilience and innovation of businesses amid challenges. Lessons from the pandemic underscore the need for preparedness and continuous innovation in risk strategies. Embracing these strategies is key to turning supply chain vulnerabilities into competitive advantages and facing future challenges with confidence.

If you're passionate about driving efficiency and innovation, earning an online MBA with a specialization in global supply chain management from Purdue University could be your next strategic move. Explore the Purdue Online MBA or reach out today for more information.

If you would like to receive more information about pursuing a business master’s at the Mitchell E. Daniels, Jr. School of Business, please fill out the form and a program specialist will be in touch!

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