Environmental and internal threats are always present for original equipment manufacturers (OEMs), but there are also steps you can take to mitigate those risks. Of course, before you can take steps to protect your factory and your supply chain, you need to know what threats may be looming. After you've identified them, it will be time to plan corrective or preventative actions and then kick these new strategies into high gear. The end result will be a more efficient supply chain, with fewer stoppages and more confidence in your end result.
Environmental risks to consider
Some risks are impossible to predict in advance, such as extreme weather and political unrest that can increase lead times for your inventory delivery from global suppliers. A recent Deloitte survey of chief procurement officers (CPOs) found that 25 percent were concerned about geopolitical risk. For instance, public unrest ahead of a controversial election in another country could impact the amount of time it takes to order and procure class C components, leading your factory in a production downtime lurch until the shipment arrives.
"What stood out for me is the acknowledgement of geopolitical risk amongst CPOs," said Ian Stewart, chief economist at Deloitte. "This aligns with sentiment across other C-level executives, and recognizes what we do feel are heightened levels of geopolitical uncertainty."
Geopolitical uncertainties heading into 2015
In 2014, tensions between Russia and Ukraine topped the charts in terms of geopolitical uncertainty, and CNN reported that this could continue to be a source of risk for months to come, at least. The source also highlighted ISIS, as the terrorist group has grown to be a formidable threat the world over. Though U.S. military action has created a setback, ISIS is likely not done stirring things up. Relations between China and Japan could create issues for OEMs, as well. These nations are home to manufacturers that are connected with countless global supply chains, and if the situation escalates, it could spell disaster for OEMs across the globe.
"This would freeze up very quickly," said Michael Moran, managing director at Control Risks consulting firm, according to CNN. "There would be economic disruption all over the planet."
These are just a few of the areas OEMs should pay attention to when it comes to risk mitigation. Of course, other issues could crop up in coming months that will also need to be considered.
Risks from within the supply chain
Environmental factors are only part of the puzzle, as things can go wrong internally and cause problems as well. The basic risks include things like delivery delays, production malfunctions, customer-created hold-ups and more. The University of Tennessee published a study on the many facets of supply chain risk management, and pointed to other factors such as quality control, forecast errors, legal issues, technological and equipment failures, and price fluctuations
How to mitigate risk
Now that you have an idea of the external factors you'll have to grapple with, it's time to start forming your contingency plans. Inbound Logistics suggested first considering how environmental risks could impact your factory operations and your overall supply chain. If war broke out in Asia, for example, would it directly or indirectly affect any of your suppliers? How would a massive blizzard impact your ability to make timely deliveries to your customers?
When you have a general idea of how these threats could impact your supply chain, you can start to consider the various actions you could take in terms of reducing lead times, improving operations and otherwise preparing for any of the problems that could arise. As many supply chain risks could lead to inventory stock-out, you may want to put effort into this area by investing in a vendor managed inventory (VMI) program that would vastly reduce that risk by creating a steady flow of parts to your factory.