Why is it Important to Control Supply Chain Risk?

The supply chain covers all the steps from a product or service being materialized to it being delivered to the end customer. It goes without saying that this covers many processes, which need to be optimized in order to gain profitability, ensure high levels of customer satisfaction, or reach sustainability targets. Let us explore these processes in detail and delve into why actively monitoring your supply chain risk is critical to your business. 

Ensure proper supply chain control

What is SCM - Supply Chain Management? 

Supply Chain Management (SCM) is a way for businesses to monitor and optimize how they produce and distribute their products and services. When one is doing supply chain management, one is taking into account all the different processes that make up the supply chain. In other words, you are looking to optimize how a product or service is being produced, from raw material to finished product, and delivered to the customer or consumer.  

SCM definition 

The definition of supply chain management is the design, planning, control, and monitoring of goods and services to and from companies. The management is executed in a centralized manner to ensure that all processes and operations run smoothly, from manufacturing to distribution. 

This is why you need a steady supply chain manager

A growing business’ supply chain is constantly evolving. In a competitive market, keeping costs low is a priority. Losing track of your supply chain can lead to unwillingly purchasing from vendors that exploit people or the planet. Building a reputation takes years of delivering on your promises, but only one incident can break the trust with consumers, governments, and business partners. With CEMAsys’s Supply Chain Control, you can proactively manage supplier risk. Make changes in the supply chain on your terms.

Want to better manage your supply chain? Try the CEMAsys solution 

The processes in a supply chain

Supply chain management is the strategic planning of people, processes and resources that influence each other through the production cycle. This only works when all the key actors collaborate and components function together. 

Raw materials 

The basis of the product or service that is being produced.

Supplier

The supplier provides the raw materials that the production is dependent on. 

Manufacturer 

The manufacturer uses the raw materials that are being provided by the supplier to produce the finished product. 

Distributer 

The finished product is being distributed to the correct retailer, customer or final consumer. 

Retailer 

The retailer is carrying the product or function as a middleman between the manufacturer of the service and consumer who is interested in using the product or service.

Consumer

The consumption of the product or service is essential to profitability and provides value to all the previous steps in the supply chain. 

Complimenting logistics

Logistics is key to well-functioning supply chain management, and none of the components or processes of SCM would function without effective and efficient logistics management. The classical approach to supply chain management is to optimize the process from raw material extraction until delivery. By integrating ESG principles into logistics, companies can not only enhance sustainability but also drive operational efficiencies, reduce costs, and build stronger relationships with stakeholders. CEMAsys’s Supply Chain Control increases transparency, traceability, and accountability in the supply chain. 

The Supply Chain Management process: How does it work, step-by-step

Phase 1: Planning 

Planning includes a forecast for demand and ensuring that all the inventory levels are matching the demand. It also involves planning for the production of new products or services. A big part of this is also to determine the metrics that will be used to measure the effectiveness of the supply chain. 

Phase 2: Sourcing 

In order to provide an effective supply chain, it is important to identify the main providers and suppliers that are critical to producing the product. This includes ordering, receiving and managing inventory of raw materials and components. 

Phase 3: Manufacturing

The raw materials and components that are being delivered by the suppliers and providers must be organized for production. This includes a design phase before production and a quality control after completion. 

Phase 4: Delivery 

Logistics, transportation and distribution is one of the final processes, where the product or service is delivered to the consumer or customer. This includes communication between distribution centers, warehousing and order fulfillment. 

Phase 5: Returns 

Should something be returned, either because of production faults, excess or end-of-lifecycle productions, is this also handled within the supply chain management. This is oftentimes a critical part of customer satisfaction. 

ESG in the supply chain 

Controlling your supply chain from an ESG (Environmental, Social, and Governance) perspective is crucial for several reasons. 

1. Risk management

ESG-focused supply chains help identify and mitigate risks such as environmental damage, human rights violations, and regulatory non-compliance. This proactive approach can prevent financial losses and reputational damage

2. Regulatory compliance 

Governments and regulatory bodies are increasingly mandating transparency and sustainability in supply chains. Adhering to ESG criteria ensures compliance with these regulations, avoiding legal penalties and maintaining operational licenses

3. Stakeholder confidence 

Investors, customers, and other stakeholders are placing greater emphasis on sustainability and ethical practices. A strong ESG strategy in your supply chain can enhance stakeholder trust and attract investment

4. Cost reduction

Implementing ESG practices can lead to cost savings through improved resource efficiency, waste reduction, and better financial risk management

5. Competitive advantage

Companies with robust ESG strategies often gain a competitive edge by differentiating themselves in the market. This can lead to increased customer loyalty and market share

6. Long-term value creation

ESG initiatives contribute to long-term value by fostering innovation, improving resilience, and ensuring sustainable growth

Why is it important to identify risk in the supply chain? 

Identifying risks in the supply chain from an ESG perspective is crucial for several reasons. Environmentally, it helps reduce carbon footprints and encourages sustainable practices, minimizing environmental damage. Socially, it ensures fair labor practices and safe working conditions, preventing human rights violations and fostering positive community relationships. 

From a governance standpoint, it promotes transparency and ethical practices, building trust with stakeholders and attracting ESG-focused investors. Operationally, proactive ESG risk management prevents supply chain disruptions, enhances efficiency, and drives innovation and resilience. Additionally, it boosts brand loyalty and provides a competitive edge by differentiating companies in the market. Overall, integrating ESG risk management into supply chain operations enhances sustainability, ensures ethical practices, and drives long-term success.

Risk management and goal orientation  

Supply chain management is a way of ensuring that you are on top of business objectives and have a clear path to achieving these goals. If you are familiar with potential risks you can easily implement measures to prevent future problems. 

Supply Chain Control (SCC) is a tool that will help you identify and mitigate the risks of supply chain disruption. Supply chain disruptions and planning in a volatile world that might halt production can have a massive impact on the . The goal is that the operations are working well together, meaning that the products or services are being delivered to the correct consumer in an appropriate manner. This is hugely important to customer satisfaction, which plays into profitability and market competitiveness. 

To control the supply chain means to keep an overview of your inventory and the supply you offer the stakeholders in the operations. This is something that you should want to be nailed down, as it is the only way for you to plan supply and avoid both shortage and oversupply. 

Additionally, it opens up for even better collaboration between supplier and manufacturer, and between distributors and retailers. A good supply chain with efficient logistics in place will only benefit the consumer in the long run. 

Supply chain control explained 

Phase 1: Map your supply chain 

To identify risks, you must know your supply chain. Importing your suppliers into the system can give you a good overview of where challenges and risks may arise.

Phase 2: Create a survey

Communication is key when mapping maturity and ESG risks in the supply chain. CEMAsys’ survey function centralizes supplier communication in one place through either standardized surveys or creating your own to map ESG risks.

Phase 3: Survey delivery and monitoring progress

The Supply Chain Control from CEMAsys is a centralized hub to send out surveys and analyze the results. 

Phase 4: Analyze results

You can easily compare supplier scores in the dashboard and dive into specific suppliers and total survey results. 

Phase 5: Review the results 

After identifying pain points in the analysis, we can reach out to high risk customers to identify and control the issue. 

Why should I invest in supply chain control? Benefits of SCRM

Reduce supply chain risk – SCC identifies supplier risk in one place. Simplify the process of reaching out to risky suppliers. 

Prevent supply chain disruption – SCC provides full transparency in the supply chain, which allows companies to optimize their processes and implement measures. Reach out to risky suppliers to mitigate or prevent supply chain disruptions.

Build long-term relations with suppliers – ESG-oriented Supply Chain Management emphasizes building long-term relationships with trusted suppliers. 

Take advantage of our Supply Chain Control (SCC) solution 

Reduce risks, save costs, and manage business relations with a competent SCC solution. Our system is user-friendly and makes it easier to track and manage all processes of the supply chain.