MANAGING RISK IN THE SUPPLY CHAIN

Managing Risk in the Supply Chain
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Managing Risk in the Supply Chain
Supply chain management (SCM) involves the management of the entire production process, from storage of raw materials to the manufacture of these raw materials into the finished good, and the delivery of the goods and services to the consumer. A company’s survival and success depends on an efficient supply chain management system. To maintain a competitive edge over other companies, it is important that companies focus on improving SCM. This will ensure customer’s satisfaction, and shareholder value, which defines a successful business is upheld (Machowiak, 2012). This paper explores the main risk factors for a supply chain and the tools required to manage these risks.
In any business process, there are risks involved, and supply management is not an exception. These risks include supply, demand, product and environmental risks. Some of the short-term remedies such as lean practices and just in time strategy have proven to be less effective as they present a threat of supply chain disruption. It is therefore important to apply long-term solutions such as integration of risk management into the companies’ strategy so that the objectives of risk management are aligned with those of the company (Machowiak, 2012). There are two approaches to dealing with SCM risks; reactive and proactive approaches.
The reactive approach involves putting in place measures to deal with the risk after it has occurred while proactive approach involves enacting measures to deal with the risk before it occurs (Grotsch et al.

, 2013). The reactive approach is often used to prevent shortages in case of unexpected by having a safety stock in place. This helps to prevent delays in delivery. The proactive procedure is used primarily to prevent supply chain disruptions as a result of supplier insolvencies. For this approach to be practical, the company should install supply chain risk management detection systems. The detection systems have highly advanced computational information systems which allow for faster and stronger assessment of the risk and therefore the more effective solution to the risk.

References
Grotsch Volker M., Blome Constatin & Schleper Martin C. (2013). Antecedents of Proactive Supply Chain Risk Management- A Contingency Theory Perspective. International Journal of Production Research. 51:10,2842-2867. Retrieved from
Mackowiak W., 2012, Risk management – the unappreciated instrument of supply chain management strategy. Scientific Journal of Logistics. 8 (4), 277-285. Retrieved from http://www.logforum.net/vol8/issue4/no1 [Accessed 7 April 2018]
http://dx.doi.org/10.1080/00207543.2012.746796 [Accessed 7 April 2018]