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Corona pandemic: How companies can protect their supply chains with a risk management system

Transport Control International GmbH
2020-03-25 08:09:00 / Comments 0

The global spread of the lung disease Covid-19 has the world in its grip and is increasingly disrupting the supply chains of many companies. There is no company that is not currently complaining about supply problems: According to research by risk management specialist Riskmethod, 81 per cent of companies in Germany are currently experiencing supply problems in their transport chain. Opel, for example, the car manufacturer from Rüsselsheim, has currently stopped production completely, as has VW in Wolfsburg. In order to minimise the risk of getting into such a situation, companies should invest in a functioning risk management system at an early stage. How can this work? We explain the benefits and what to do in the current crisis situation in our blog article.

Creating transparency in the supply chain

First of all, it is important for companies to gain an overview of their supply chain, their suppliers and their suppliers' suppliers in order to identify existing problems as quickly as possible and develop solutions. It is important to have an overview of all outstanding orders and the manufacturing processes for which the ordered goods are needed. On this basis, it can then be determined which service providers can supply urgently needed goods and which suppliers are affected by the coronavirus because they produce in one of the heavily affected countries. Contact should be made with these companies and the production problems discussed.

If the problems prove to be serious, it is important to look for alternative suppliers and also for additional products that can be supplied as an alternative to partially compensate for the supply shortages. Companies should also talk to their own customers to let them know that production delays may occur. Many companies often forget this in the current crisis situation. Transparency and openness are important in order to find solutions together with the customer. If bottlenecks already exist, one option would be to order larger quantities of products for the warehouse from manufacturers who still have to deliver. This would initially put a strain on your own wallet, but ensures your own ability to deliver.

Due to the current difficult situation, situations can change constantly. The supply chain should therefore be constantly monitored. For example, established monitoring systems provide transport data on where the goods to be delivered are located and what the transport conditions are like. For example, transport data loggers can provide data on whether goods are still being transported or are still in a temporary storage facility because the carrier has been cancelled due to financial problems. An employee should be appointed within the company to collect and analyse this data. In addition, press reports and online media should be followed closely. Google Alert, for example, can always provide the latest news on certain suppliers so that you can react to current developments.

Data generation in your own company

As a company, you are also part of the supply chain and rely on suppliers. It is therefore important to collate data from different sources within the company in order to be able to make the right decisions. For example, if order confirmations are late, orders arrive too late or advance payments are no longer made, these could be signs that suppliers, service providers or hauliers are getting into difficulties. Looking at supplier ratings is no longer enough in the current crisis and leaves out important data from the company itself and press coverage.

Data analysis and monitoring

Once sufficient data has been collected from the company, the figures should be organised and prioritised. Decision-makers should ask themselves the question: what would it cost me if the supplier went out of business? Would the plant have to be closed? And should alternative products be ordered at extra cost to overcome bottlenecks? The resulting risk management concept should not disappear in a drawer, but should also be applied. In particular, monitoring the supply chain by establishing a monitoring system is an ongoing task. In addition, the risk analysis should be reviewed at regular intervals so that it is always adapted to the current needs of the company.

Risk management pays off in the long term

Investing in a functioning risk management system is an investment that pays off in the long term. After all, natural disasters or virus epidemics will continue to break out in the future and have a significant impact on supply chains. But even with everyday transport chain problems, risk management systems pay off - for example by establishing a tracking system that monitors transports for stability, temperature, humidity or inclination. This can prevent millions in damage and save costs. The investment in professional risk management quickly pays for itself. In practice, this means identifying critical materials and therefore suppliers, creating transparency in the supply chain, developing scenario-based crisis strategies and building strategic supplier partnerships on this basis.