How to Mitigate Supply Chain Risks: New Sourcing Partners

Mitigating supply chain risks and securing new sourcing partners have become a priority for business executives. Globalization has created vast networks of cross-border commerce vulnerable to catastrophic disruptions. According to Bloomberg, China accounts for 12% of global trade, and due to COVID restrictions, supply chains suffered greatly. Factories, retailers, and consumers experienced major operational disruptions during the pandemic.

Changing business-as-usual practices have become a priority for business executives. Turning global supply chains into regional is no longer an option. Shifting to shorter supply chains to countries like Mexico and Colombia is well underway. However, securing new sourcing partners can be a difficult and time-consuming process that companies cannot avoid.

Identify the Threat

Many manufacturing companies are still feeling the pain from COVID and related supply chain snags. It is essential to devise a plan to mitigate supply chain risks and secure new sourcing partners. An excellent way to assess your supply chain risk is to rank your potential threats. Set up a matrix that addresses all potential hazards, with likelihood of occurrence along one axis and magnitude of impact along the other. Start by prioritizing threats that score highest on both axes.

Develop a Disruption Map

After identifying potential threats, analyze where these threats would most likely occur. Your disruption map will show where these threats can affect your supply chain. Determining where a company is most vulnerable will allow management to implement measures to mitigate supply chain risks. Contingency plans can then be put in place to minimize costly disruptions.

Create Security and Recovery Plans

If you mitigate risk and secure new sourcing partners, you reduce the chances of costly disruptions to operations. Companies must incorporate redundancies into their plans to hinder threats from impacting their production. As companies assess their disruption maps, they should analyze new sourcing partners, freight and distribution alternatives. Anticipating weak links will significantly reduce the negative impact during a disruption.

Leverage Technology

Technology is one of the critical tools for mitigating supply chain risk and securing production. It allows visibility to products as well as assets across extensive networks. Find out what technology best fits your organization. The right technology will enable production operations to become more agile, resilient, and efficient.

Securing Production

Careful planning can help companies mitigate the risk associated with having a global supply chain. Migrating to a regional supply chain or creating redundancies by nearshoring will help companies reduce supply chain risk and secure production.