THOUGHTS

Key Supply Chain Risk Factors for Manufacturers

Aug 16, 2019

The globalization of businesses over the last decade and the manufacturing industry, in particular have made it imperative for executives and risk managers to reassess the risks facing their organizational processes and their supply chain activities. Effective supply chain risk management in manufacturing companies is often hindered by factors including supplier failure and non-traditional risks.

Furthermore, supply chain vulnerability is also increasing due to risks including supplier relationships, manufacturing process, and shipment of finished goods. While creating a supply chain risk management for companies in the manufacturing industry, manufacturers must also consider some of the below-mentioned factors that are sometimes out of their control.

supply chain risk

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Top supply chain risk factors for manufacturing companies

Disruptions in distribution

When a key supplier moves their operations to another country, it can have a significant impact on the cost of production and raw materials for a manufacturer. Supply chain risk managers must ensure that regular communication and the presence of strong contracts between value parties to prevent such unforeseen contingencies.

Laws and regulations

The degree of supply chain risk faced by a manufacturing company can be greatly affected by the changes in laws and regulations. For instance, if the wage laws and overtime regulations in a particular region change, then it may eventually result in increased costs.

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Market competition

There’s a growing concern with mergers and acquisitions (M&A) of big companies across industries. These M&As have the potential to create monopolies, allowing organizations to eliminate competition and make it harder for smaller companies to survive. Market competition is also continuously changing and innovating. As such, organizations must decide which modern technologies and processes to adapt or risk falling behind other agile movers in the market.

Labor issues

When a workplace is unionized, it becomes difficult to adjust employee contracts as and when required. For example, laying off employees may prove to be tough during periods of low customer demand or relocation of assets. Adequate training must be given to employees in order to maximize productivity and reduce risks. Manufacturers must also take measures to ensure that in case of any employee’s absence, the production process is not disrupted.

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