Supply Chain Management Blogs by SAP
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Risks in the supply chain can arise from various factors, such as natural disasters, geopolitical issues, supplier failures, labor disputes, cyber-attacks, or fluctuations in demand and pricing. In the recent past, supply chain practitioners have experienced quite all of them! 


To protect your business from supply chain risk, you need to start a process of identifying, assessing, and mitigating potential disruptions or threats to the continuity and performance of a supply chain. In other words, you need to deal with Supply Chain Risk Management (SCRM). 

The main goal of supply chain risk management is to ensure the smooth functioning of the supply chain and minimize the impact of disruptions on the organization's operations, profitability, and reputation. Here are the five steps supply chain planners should take to increase risk resiliency: 

 

1. Risk identification: Recognize potential risks and vulnerabilities in the supply chain by analyzing internal and external factors, such as suppliers, transportation, production processes, and distribution networks.  

SAP is collaborating with partners like Everstream to provide visibility into the movement of goods and identifying any potential disruptions or delays. This allows companies to quickly respond to issues and minimize the impact on their operations.   

SAP has also introduced a risk dashboard based on risks that can be found within the supply chain planning data itself. It can illustrate risk areas resulting from low forecast accuracy, inaccurate safety stock levels, resource bottlenecks, and excess CO2 emissions. The risk dashboard content is based on the new analytics stories app which is now available in SAP Integrated Business Planning (SAP IBP). Read the recent blog for more details and see the look and feel of the solution in this video. 

 

2. Risk assessment: You can evaluate the likelihood and potential impact of each identified risk on the supply chain through qualitative or quantitative methods, such as risk matrices, scenario analysis, or probabilistic modeling.  

With SAP IBP, planners can define multiple risk scenarios and analyze the impact of each scenario on key performance indicators (KPIs) such as revenue, profit, and customer service levels. These simulations help organizations understand the potential implications of different decisions and identify the most suitable course of action. 

 

3. Risk prioritization: You can rank the risks based on their significance and potential impact on the organization's objectives. Scenario planning in SAP IBP facilitates cross-functional collaboration to ensure that the organization's decisions are based on a comprehensive understanding of the potential risks. 

 

4. Risk mitigation: You can develop and implement strategies to reduce or eliminate the identified risks. This may involve diversifying suppliers, and intensifying collaboration with your business network.  

It is essential to establish robust processes, trustful long-term relationships, and feedback loops with critical suppliers to, for example, exchange data on expected demand, available supplier capacity, and inventory. Specifically, by sharing forecasts and demand plans digitally with your suppliers and receiving commitments, you can see if supply will meet your needs, which increases visibility and reduces cycle times. 

By providing broad visibility into your trading partners’ inventory and capacity, SAP Business Network helps you identify supply issues early, even on a n-tier supplier level, and helps you avoid supply chain disruptions. 

 

5. Risk monitoring and review: It is important to continuously monitor the supply chain to identify new risks and assess the effectiveness of existing risk mitigation strategies. As new information becomes available or market conditions change, organizations can update their scenarios and re-evaluate their risk mitigation plans. This iterative approach helps companies stay agile and adapt to changing circumstances more effectively. 

 

Effective supply chain risk management requires collaboration and coordination among various stakeholders, including suppliers, manufacturers, logistics providers, and customers. By proactively managing risks, supply chain planners can improve the resilience of their supply chains, reduce operational costs, and enhance their competitive advantage in the market.  

Click here to find out why IDC says SAP solutions can help you realize a holistic supply chain planning strategy that gives you greater control and reduces supply chain risk. And - visit the SAP booth at Hannovermesse, and get the latest insights from a product demo!