Risk in Supply Chain Management
Each and every commodity that is produced and consumed by the end user undergoes a series of processes for this to be achieved. This is the entire supply chain. Many industries have supply chains; some of these may be longer than others, mostly depending by the number of players that it has. Some popular industries that involve a series of players usually have longer chains.
In these chains, various things are done such as value addition, transportation from one place to another, storage in warehouses and so on. Each and every player here usually referred as the ‘middlemen’ has one major objective of maximizing their profits. This has been one major hindrance to the producers at the primary level who end up disposing their products very cheaply with the middlemen taking the highest share of profits. Therefore, there is a dire need for one to be in a position to manage supply chain appropriately to ensure highest level or returns at whichever level of supply chain you could be operating from.
There are also so many risks that are associated with supply chain. Most of these pose a very big threat when it comes to profitability. Many people have been pushed out of business due to such risks. However, it is important to try and understand the best way to go about them. This way, you are able to safeguard yourself and to also have the relevant knowledge on how to tackle them when they come.
Some of the Common Risks:
Production risks
One major component in the supply chain is the producers. This is very important because this is where the chain starts. For any producer who may invest their capital into production they may be confronted by production risks. Mostly these are as a result of factors of production which are used to generate more capital. The major problem is the scarcity of the resources, something that is apparent in almost each and every industry. It is very important therefore to try and make clear calculations before you venture into any production. Of essence in this level is the over or under estimation of resources, something that can lead to great losses either way.
Price risks
This is actually maybe the most significant risk that is very apparent in the supply chain. This is because most markets structures assume the perfect competition where the players have no control at all. In this type of a setup, prices are influenced by demand and supply forces which are bound to drastic changes. This type of risk can affect any player in the supply chain, though the producer, who has to dispose their products suffer the most. It is beneficial to take some courses on how to manage such risks. In some instances, you can analyze the market trends for some commodities. This has to play majorly with the demand and supply of the commodity. For instance, using the Cob-Web theory, you can try and figure out the best production time for a specific commodity; a time when the product maturity will come when the supply is low, hence higher prices.
Operational costs
This is something that cannot be avoided at all in the supply chain. When your work is to transport the commodity from the producer to the market, there are some costs that you will incur. This risk is also quite broad because costs are incurred everywhere. In transportation for instance, the infrastructure may be poor leading to delay. This is quite harmful because it can also lead to another risk of perishability especially for products that should be consumed fresh.
source; Godzilink.com
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