Supply chain management is a critical element in managing your business. You need to understand and manage the risks associated with it.
The number one objective of buyers is usually to keep continuity of supply. Other common objectives are:
- Consistent quality
- Protection of intellectual property
- Avoidance of sudden price increases
- Access to specific competencies that help develop innovative products
Risks in a supply chain
There are four main factors that can influence risks in a supply chain:
- Complexity – the number of steps (suppliers and sub-suppliers) involved in getting a product finished. The greater number of sub-suppliers involved, the greater the complexity and consequently, the more risk.
- Customization – the more your product, and its components, are unique, the higher the risks. You might rely on one critical supplier because they are the only one who managed to do plating with the visual effect you wanted, for example.
- Distance – do components come from different countries or across the world? Parts can be on a ship for weeks at a time and be subjected to customs inspections and delays, among others. The parts will be handled by multiple people and departments, each step increases the risk within the supply chain.
- Sourcing destinations – some areas and countries come with their own risks. For example, your die casting factory in Shandong might get closed overnight because of a tighter anti-pollution policy. Or your Bangladesh factory subcontracted your goods to a workshop that catches fire (triggering a massive PR crisis for your company).
Two common challenges buyers face
- Sub-suppliers’ identities are concealed – this often happens when a supplier wants to maintain control and handles all the sourcing of each component. This way you as a buyer are at risk as you have zero control over the quality of the components being purchased or manufactured by these third-party sub-suppliers.
- Undisclosed subcontracting – you as a buyer may visit a factory and approve all the facility and agree to have your product manufactured there. However, while you are not there, the factory subcontracts out part or all your work without your knowledge and consent.
At Sofeast, we work closely with you to establish a known and trusted supply chain for your business where we can verify and manage each step of the manufacturing process.
For more information on how we can help you, contact us through our contact page.
Supply chain management is a tightly linked topic to our webinar about the low-risk supply chain.
8 Elements of a Low-Risk Supply Chain in China
This FREE webinar will empower you to transform your supply chain in China to reduce risks. Two industry experts, Renaud Anjoran and Paul Adams from Sofeast, talk you through how to gain control over your product’s quality, on-time shipments, long-term pricing stability, and continuity of supply.
Ready to watch? Register by hitting the button below:
