How To Identify Supply Chain Vulnerabilities

How can companies identify supply chain vulnerabilities to be better prepared for the future?

Supply chains have been hit hard by volatility over the last few years due to the pandemic and turbulent economic environment. Now, as economies are starting to settle and we’ve realized just how fragile supply chains can be, companies are ready to act.

Here are some best practices that can help companies better prepare for supply change disruption and risk.

Become More Agile 

Companies have learned how valuable and necessary an agile workforce is—not only for responding to supply chain risk, but also for research and development, procurement, planning, manufacturing and logistics, etc.

Build a Culture of Risk Management 

Companies that successfully managed supply chain issues in recent years all share one common denominator: a culture of risk management. Developing and maturing a management infrastructure that recognizes, prioritizes and plans for risks including supply chain and other disruptive events is important as ever.

Conduct Stress Tests

Since supply chain risk is a constantly moving target, companies should proactively conduct stress tests to determine if the current supply chain remains appropriate.

Create Supply Chain KPIs

Creating and communicating supply chain KPIs helps the entire organization understand the company's performance. Key supply chain KPIs can include fill rate, inventory turnover and customer order cycle time. KPIs will help companies evaluate supply chain design and execution, as well as where to make necessary adjustments.

Identify Internal, Third-Party and Economic Risks

To truly understand their supply chain risks, companies need to conduct comprehensive vetting of suppliers, processes and facilities that test  points of failure. They should also identify what critical inputs are at risk from shortages or price volatility.

Improve Supply Chain Management Systems 

Since the pandemic, many organizations realized how limited the systems they use  to measure and monitor supply chain vulnerabilities are, with few having direct visibility beyond direct suppliers.

In fact, a 2021 McKinsey survey of senior supply chain executives reported that just under half understood the location of their tier-one suppliers and the key risks those suppliers face, but only 2% could say the same about suppliers in the third tier and beyond – where most disruptions originate.

To address the issue, companies should consider developing systems and tools to monitor vulnerabilities beyond their direct suppliers.

Move Past Six Sigma and Process Optimization 

Prior to the pandemic, six-sigma and process optimization drove most supply chains to achieve stability and minimize costs. However, the past few years show that companies will need to be much more agile and dynamic moving forward to respond to rapidly changing demand and vendor shortfalls.

While there is no one solution for supply chain risk management, a commitment to continued efforts that balance enhanced flexibility, productivity and quality while moving at the speed of customers will be the new status quo to prepare for long-term uncertainty.

Related Articles

About Schneider Downs Business Consulting

Schneider Downs Business Consulting delivers sophisticated consulting services to meet the complex needs of today’s business environment. Our team features experiences professionals across a diverse array of specialties that allows us to help our clients make more informed business decisions across every facet of their operations.

To learn more, visit our dedicated Business Consulting page.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2022 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Zero-Based Budgeting: The Continued Pursuit of Savings
Post-Pandemic Fraud Landscape
Has the Pandemic Increased the Value of Golf Courses?
How To Identify Supply Chain Vulnerabilities
Changes to R&D Expense Rules Affecting Manufacturers
Understanding the Value of Value Chains
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×