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6 ways Supply Chain Risk Management is good for planning

Supply chain risk management (SCRM) identifies, assesses, and mitigates risks within the supply chain. It’s about anticipating problems before they arise, allowing businesses to adapt and avoid disruptions. But how does this support planning professionals?

With an effective supply chain risk management strategy, and the technology to support, your planning team can receive the insights they need to prioritize and address the most impactful risks and opportunities. Here are just some of the benefits of supply chain risk management for planning:

1 – Monitoring disruptions

By seeing a problem before competitors, companies can enhance agility. When risk increases for a key product or material, the company can shift to alternates to ensure supply ahead of competitors or stockpile critical inventory before a price hike or shortage.

Organizations can extend this advantage to form long-term plans that reduce risks for specific product lines. For example, knowing that they are dependent on a single supplier for a critical raw material, a company can plan to build more inventory or dual source. This information can also inform contract negotiations with new or existing suppliers.

2 – Sourcing bottlenecks

With sub-tier visibility, companies often uncover “sourcing diamonds.” These are supply relationships where a company has multiple Tier 2 suppliers for a critical part, but those Tier 2 suppliers are all sourcing materials from one or two Tier 3 suppliers.

Strategic supply chain mapping helps identify these sourcing diamond dependencies at the Tier 2 level. Uncovering Tier 2 sourcing diamonds can drive the need for a further deep dive into the affected sub-tiers.

3 – Compliance risks

Companies may discover looming compliance risks from a Tier 2 supplier being on the UFLPA watch list, for example, or by supplying material from a region prone to using child or forced labor. Uncovering these connections is a strong indicator of the need to explore deeper sub-tier visibility. Learn more about how SCRM supports compliance here.

4 – Scope3 carbon emissions

With more and more companies setting clear Scope 3 reduction targets, strategic visibility can help identify low-hanging fruit in Tier 2 for impactful results. For example, uncovering a Tier 2 steel supplier (emissions-heavy processing) can trigger a discussion with the related Tier 1 supplier to switch to green steel for a surcharge. Or a Tier 2 connection may lead to a supplier cluster in a region reliant on inefficient CO2 energy. (e.g., coal energy). If this cluster can be switched by incentivizing the Tier 1 to change one supplier, the Scope 3 balance will be greatly improved.

5 – Enhance forecast accuracy

Planning professionals rely on accurate forecasts to make informed decisions. SCRM helps by providing data on potential risks that could impact supply and demand. This means you won’t be caught off-guard by unexpected shortages or surpluses, allowing for more accurate and reliable planning.

6 – Support better network planning practices

With information about your network risk, vulnerabilities, and opportunities, planning professionals can leverage SCRM insights to make better decisions across all aspects of the supply chain – from selecting responsible, sustainable sourcing partners, to optimizing routes and decreasing logistics costs.

How do risk insights from Everstream Analytics support planning?

Strategic planning, network design, transportation, and inventory planning all require precision and foresight. Risk analytics emerges as an indispensable tool here, providing the insights planners need to make informed decisions and ensure seamless operations.

Risk analytics enhances strategic planning by offering a comprehensive view of the potential challenges and opportunities that lie ahead. By understanding these dynamics, planners can align supply chain strategies with business objectives, ensuring that what is produced aligns with market demands and sustainability goals. For instance, risk insights can reveal dependencies on single suppliers, prompting diversification and strengthening supply chain resilience.

In network design, risk analytics plays a pivotal role by shedding light on the vulnerabilities and strengths within a supply chain. This understanding enables planners to optimize the network structure to support corporate strategies effectively. Identifying bottlenecks or “sourcing diamonds” — where multiple suppliers rely on a single source — can guide businesses to mitigate risks and secure their supply lines.

Transportation planning benefits from risk insights by preempting disruptions that could affect logistics. Planners can adjust routes or schedules in response to predicted disruptions, minimizing impacts on delivery times and costs. This agility is crucial in maintaining service levels and customer satisfaction.

Inventory planning is another area where risk analytics proves invaluable. By providing data on potential supply and demand fluctuations, planners can fine-tune inventory levels, avoiding costly overstocking or shortages. This precision helps maintain balance, reducing buffer stock while ensuring availability.

Across all these planning types, the integration of risk analytics allows planners to anticipate disruptions and craft strategies that are both proactive and resilient. Whether it’s adjusting to compliance risks, like those posed by the UFLPA, or addressing environmental considerations such as Scope 3 emissions, the ability to incorporate risk insights into planning activities is a game-changer. As planning professionals harness these insights, they not only enhance operational efficiency but also contribute to building a sustainable and future-ready supply chain.

By enhancing forecast accuracy, improving decision-making, increasing resilience, boosting collaboration, reducing costs, enhancing supplier relationships, and enabling agile responses, SCRM ensures that planning professionals are always a step ahead.