Let's face it - business is steadily getting more complex, as companies need to deal with increased competition, shortened product life cycles and growing number of variants that target small consumer niches. To cope with this situation, firms have deployed ever more complex and international supply chains, trying to balance between cutting costs and keeping the necessary flexibility.

What does this mean? You are exposed to an increasing lists of risks that have hitherto been omitted - problems with ensuring steady supply, wildly fluctuating prices and - on top of that issues of sustainability, environmental impact and corporate social responsibility. This puts a strain on traditional Enterprise Risk Management - which concentrates mainly on your company and its own processes and which is not equipped with the right tools to deal with external risks that come from hundreds of organisations you interact with.

Costs of inadequate supply chain risk management

Do I really need Supply Chain Risk Management?

A typical response we often hear from CPOs and procurement professionals – especially in countries where the profession is still relatively immature – is “I’ve been working for this company for the last 10 / 20 / 30 years and nothing has happened so far.” This is a false sense of security – research by the BCI shows that supply chain disruptions are frequent.

Supply chain risk statistics

Supply chain disruptions don’t only have a temporary negative influence on production – they adversely affect the whole company through:

  • Higher cost of capital/borrowing, since capital markets begin to perceive the company as more risky
  • Possible shareholder lawsuits Loss of reputation and credibility, negative publicity
  • Management and personnel turnover as a result of all of the above
  • Excess inventory and inventory write-offs resulting from knee-jerk reactions to increase stocks after disruptions

Reactive risk management is no management at all!

Think about the following: when a supply risk hits your company, it's ALREADY TOO LATE!

Risk management - business needs Think about the following: when a supply risk hits your company, it's ALREADY TOO LATE! You can merely react and hope to keep the damages as low as possible. But that's merely the first step, since it's not enough to monitor your direct suppliers, as many practitioners suggest. When your direct supplier is affected, you can still merely react to the situation - although you may have some more time to respond. The key in Supply Chain Risk Management is to be able to identify key risks further upstream in your supply chain (i.e. at your supplier's suppliers) and work with these companies to reduce these risks. This is where Meercat Risk Management comes into play! Studies have shown that the majority of companies - both large and medium - do not lead an active risk management policy in the supply chain, but merely react to the situation of crisis. This reactive approach to risk leads, at best, to decreased profits and, at worst, threatens your company's survival. This situation is compounded by a lack of knowledge about risk management in the supply chain, and the complexity of the processes themselves. Building an effective risk management system from scratch usually requires the hiring of consultants or months of internal preparation.