The change in supply chains is in full swing. As in many other areas, an awareness of sustainability and social responsibility, corporate social responsibility, is developing here too.
Modern logistics, which have developed over the last few decades and led to more complex supply chains, are now being put to the test. The interaction between the many suppliers, transport companies, production and sales facilities not only has to function smoothly. In addition to compliance with legal and social standards throughout the entire value chain, risks must also be identified and minimized in a timely manner.
Outsourcing: You cannot give up responsibility
Distributing individual tasks or entire company areas to subcontractors and service providers is a popular way to save costs, among other things. Particularly here, a comprehensive analysis is necessary to better assess risks. In addition to the economic factors, it should be checked in advance whether the collaboration at all levels corresponds to your own requirements and values.
Because risks and violations that you cannot see at first can quickly become your own problem. If the upstream supplier has a problem, it becomes the supplier's problem. This in turn becomes a problem in itself over time.
The risk analysis begins within your own company
The central requirement of the Supply Chain Due Diligence Act (LkSG), passed in June 2021, is to carry out a risk analysis and implement it appropriately
Measures within risk management. If it already exists, the compliance management system or risk management system will be supplemented, otherwise it will be established.
The risk analysis of the entire supply chain involves a cross-company review and is therefore complex. Each company with which we work must be examined individually and systematically in order to identify, evaluate and minimize possible (compliance) risks. This includes, among other things, the risk of failure, especially with external suppliers.
The current status can be determined, for example, using a questionnaire; the results are evaluated and prioritized by experts. The individual results together form the entire risk potential.
Implementation of risk analysis
The findings of the analysis must subsequently be converted into preventive measures and the risks must be actively dealt with. The goal is always to effectively minimize risk within the supply chain. The relationship between costs and effort plays an important role and also the question of whether certain measures could give rise to further risks.
If a specific breach of the duty of care occurs or is at risk of occurring, measures must be taken immediately after becoming aware of it that will lead to the termination of the breach.
If this cannot be implemented promptly, for example at a supplier, a concept must be developed. In the event of serious violations, termination of the business relationship may also be considered.
Analyzing, taking action and correcting any violations is not a one-time affair. The test should be repeated annually as part of a holistic risk assessment or as required.
Only continuous supervision leads to successful risk management of the supply chain. The introduction of a new product or a new collaboration with a supplier, for example, is a suitable opportunity to go through the process again.
Strategic risk management
Unforeseen events can paralyze entire supply chains. In the past few months, the Covid-19 pandemic has shown how quickly this situation can be achieved and what is then really the focus: basic care. Strategic planning and solid risk management can prevent collapse and also prepare the company for such crises.
Strategic planning and sound risk management can prevent collapse and also prepare the company for such crises.
Even if at first you think that events such as pandemics or natural disasters cannot be planned, upon closer inspection you will quickly realize that such or similar crises have already occurred in the past. Especially India is the perfect training camp for crisis management. Lessons and consequences for future crises must be drawn from every event experienced.
Agility plays a crucial role here. As required throughout the world of work, supply chains must also be adaptable and flexible. Environmental changes should not lead to collapse but to (business) development. A focus on a cost-optimal supply chain will not work in the long term. A focus on sustainability and flexibility, together with strategic risk management, will enable stable supply chains.
