Manufacturer’s Supply Chain Risk Management | Mentor Works

While lean production has become a cornerstone of successful supply chain management and a way for businesses to stay flexible and responsive to changing tastes in their markets, the dependence on—and relationship with—suppliers resulting from outsourcing and minimizing stock creates a host of exposures.

Successfully navigating and managing the risks presented by a complicated supply chain that spans across regional, national, and especially international territory is a complicated endeavour, considering the countless factors that can cause disruptions or liability issues across the entire supply chain.

Reducing Your Supply Chain Exposure

What can a risk manager do to effectively mitigate risk in such an environment? Fortunately, there is a growing number of best practices for risk management across the supply chain.

One of the most important things is to stay abreast of every development in your environment.

Consider the following steps you can take to mitigate your business’s risk:

  1. Choose suppliers carefully, and conduct regular audits and inspections if possible, to ensure that their commitment to business interruption prevention matches yours.
    • Verify suppliers’ insurance coverage. Remember, a certificate of insurance is evidence of insurance only when the certificate is written, and not at any time after that moment.

  1. Clearly define contract scopes and draft contracts carefully with the assistance of specialized legal counsel. Consider indemnification, hold harmless, and defence agreements.

  2. Re-evaluate on a regular basis to account for changes in the market or your business model. Focus not only on the inherent risk of a broken link in the supply chain, but the interdependencies between links throughout the chain.
    • When there is a global event, examine your supply chain to see if any part of it might be affected.
    • Be aware of developing risks, such as cyber warfare, climate change, nanotechnology, and synthetic biology.

  1. After identifying risks, put a plan into place. While it is easy to prioritize speed over follow-through, identifying risks is of little use if steps are not taken to mitigate these risks. Plans might include these components or others:
    • Business continuation plan
    • Geographical diversification of servers
    • Plan to relocate business to an alternate location
    • Sourcing of goods from alternate suppliers

  1. Some supply chain partners may have several locations that could keep the flow of raw materials going in the event of a disruption. Investigating these factors is an important component to creating a supply chain risk management plan.

  2. Transfer your risk by purchasing appropriate coverage, which could include the following, depending on your exposure mix and risk tolerance:
    • Business interruption/business income
    • Marine and cargo coverage for long voyages taken by commodities, components and finished products
    • Liability coverage, including commercial general liability and directors and officer’s liability
    • Other special endorsements specific to your exposures

Working Together for Supply Chain Risk Management

Unfortunately supply chain risk is often overlooked. By working with the ManuTech specialists at Lawrie Insurance Group, we can assess the extent of your exposure, and create a business interruption plan to limit the impact on your revenue and profitability.

For more information about supply chain exposures and insurance for manufacturers please contact Harrison Emery, member of Manutech Advantage, industry specialists helping manufacturers with risk management and business consultation.

Author Profile

Lawrie Insurance GroupRanked in the top 5% of independent brokerages in Canada, Lawrie Insurance Group is a privately owned and operated insurance brokerage with over 100 employees specializing in all areas of personal and corporate property/casualty insurance, employee benefits, financial services, and group retirement products.

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This is a post by a Guest Author. Disclaimer: The author's views are entirely his or her own, and don't necessarily reflect the opinions of Mentor Works Ltd.

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