Although manufacturing is a complex business, it has evolved as a truly global operation for several enterprises & this has meant that supply chains have diversified & grown. While this can mean effective results for the customer, it helps to deliver more varied as well as sophisticated end products. This also means manufacturing businesses, in some ways, have become more vulnerable. Manufacturers have much to consider with supplier consolation, lean manufacturing, just-in-time inventory, & expansion into emerging markets. Therefore, which are the main risks when it comes to supply chain risks in manufacturing?

Logistical delays

The range of risks that are involved with the movement of equipment, raw materials, parts & finished goods is huge & it most often comprises numerous journeys and this has always been the case. One of the recent logistical issues – the Suez Canal blockage illustrated how easily things could go wrong & how one incident can have huge impact. Around twelve per cent of international trade is trafficked via the narrow waterway so that ships between Europe & Asia need not have to travel around Africa. In 2021, when the container ship ran aground, it took almost a week to free leading to huge disruption. Even though the canal is clear now, it is likely that the impact of that blockage is still felt even today & it will continue to have a huge impact on shipping costs and this is undoubtedly unwelcome news for both the manufacturers as well as insurers. While there is still its contents in order to consider as well as the three hundred plus ships delayed by the blockage and the ship itself was likely to be insured for around USD two hundred million. Although most logistical hurdles are not this huge, it illustrates how quickly a supply chain can be thrown into whole disarray.

Weather & natural disasters

While earthquakes at one end of the scale can possess an immediate impact on all the areas, sudden freezing as well as thawing can result in floods or even power cuts on site. Make sure you factor in any suppliers that are based in countries that are to be affected by the weather disruptions while considering any business continuity plan & these events cannot most often be predicted with any huge accuracy. However, these are acknowledged as some of the key exposures in the global risks report, that are prepared by the World Economic Forum in partnership with Marsh and McLennan.

Failure of Service

There are numerous reasons for the failure of service from a supplier and one of the significant one would be going insolvent. The other reason for failure of service would also be a product that is being recalled & hence not being delivered or issues found from a health as well as safety check at the premises of the supplier. And this means changes that are required to be made. Although these are temporary setbacks, these can still lead to disruptions to customers & several other challenges.

Rise in procurement costs

This has been observed by manufacturers across MENA. The raw materials as well as components are becoming even more expensive to transport and this means that several firms may look to new supplies closer to home for avoiding the rise in paperwork & the costs that are attached to it. Even prior to the pandemic, current economic downturns/changes in global economic climates would have an impact on trade & the fluctuations in costs can and do happen and this may impact the whole entire profit margin.

Cyber disruption

One of the fastest growing risks that are impacting firms around the globe is cyber which has been a threat for some time. However, thanks to the rate of technological advancements and manufacturers are particularly vulnerable to 3 main kinds of cyber threats; phishing attacks, ransomware attacks as well as internal breaches, mainly owing to transformations in supply chains & management. Although these events cannot always be predicted or prevented, the financial impact can be prepared for the correct risk management & insurance.

How to mitigate these risks

Evaluate and identify current risks:

Examine your companies critically and pinpoint any locations where there is a risk of exposure. Determine and assess scenarios that could cause supply chain disruptions.

Purchase cargo insurance:

In many areas of life, insurance is crucial. Throughout your supply chain, it needs to be crucial. Recognize that carrier liability is not insurance. Locate a cargo insurance company that can cover warehoused products and shipments in transit against loss or damage anywhere in the world, regardless of the carrier or mode of transportation.

Prioritize by probability and impact:

It is impossible to cover every possibility, so rank potential dangers according to how likely they are to occur and then calculate each event's financial and brand impact.

Include partners in risk planning:

Make sure that your suppliers, carriers for delivery, data management facilities, and clients have business continuity and disaster recovery plans that are compatible with yours. They become more valuable as partners and play a bigger part in risk mitigation when they are included in the planning process for risk management.

Diversify Suppliers

Don't rely solely on one source for supplies or materials. Although sourcing from low-cost regions of the world is advantageous, your supply chain becomes susceptible if goods cannot be delivered on time. To reduce this risk, establish dependable secondary providers in several areas.