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How Smaller Manufacturers Can Develop Risk Management Strategies for Their Supply Chains

September 14, 2022

The very nature of manufacturing is that each key process requires a constant stream of activity to remain operational. But as with any business, any number of elements could pose a risk to the continual operation of that business including within the supply chain itself. 

Such risks could include fluctuating costs, unavailable products or materials, worker shortages, law changes and much more. This is why risk management is an essential tool for any manufacturer, including smaller manufacturers located across the UK.

Although it’s impossible to eliminate all risks of running a business, a robust risk management program will look to reduce the impact of any disruptions to the business, before the issue has chance to affect profitability wherever possible.

In today’s post, we will focus on risk management strategies within the supply chain for smaller manufacturers.

What Is Risk Management?

In its simplest form, risk management can be described as the process of identifying potential risks to the operation of a business, and coming up with strategies to minimise any disruption to the business in response. 

A risk management strategy should address these basic six questions: 

  • What are we trying to do?
  • What may affect my business from achieving its aims?
  • Which of the things which might affect my business are most important?
  • What can we do about the risks?
  • Did our methods to combat these risks work?
  • What has changed since our last risk assessment, and what are the new risks we now need to work on? 

So for a small manufacturer looking to create a risk management strategy for their supply chain, these questions would be applied to any scenarios that could threaten the operational health or profitability of the business. 

For instance, controlling and managing disruptions of customer deliveries. Likewise, planning ahead for the Christmas season, when demand is at its highest throughout the year. Plus, looking at any changing costs or even legislation that could affect the supply chain. All relevant points need to be noted, so that risk management strategies can be drawn up to combat these challenges. 

Avoiding Common Mistakes

A common saying in the manufacturing industry is that ‘a supply chain is only as strong as its weakest link’. 

There are endless common mistakes which could form said weakest link. This includes relying on single-source suppliers, which is the equivalent of having all your eggs in one basket. Should you have any issues with that supplier, this can easily grind your supply chain to a halt. 

Likewise, silos in your organisation whereby different departments aren’t actively communicating with each other can be hugely disruptive. Instead, everyone involved in your supply chain needs to be on the same level. By working together, you can also help to minimise costs as well as disruption. 

Finally, another common mistake to avoid is to skip business forecasting. In any supply chain, there are going to be peak periods and quieter times, and your business must be able to adapt, so that it can remain both operational and profitable throughout. 

Supply Chain Risk Management

Referring back to the top six questions any risk management strategy must include, a plan needs to be put in place to secure the health of your supply chain. 

Strategy – Make sure your supply chain strategy aligns with your business strategy. Consult with all departments including sales, inventory, finance and production, and create a strategy that will oversee the entire year. 

Material supply – Detail all components needed to keep your supply chain going, and where all raw materials originate from. Get to know your suppliers, and ensure the supply of goods is reliable and cost-effective. Identify any weaknesses in the supply of materials and seek out alternatives without delay.

Production and delivery – All manufacturers must work to a productive and realistic timescale. Look at all aspects that could add delays or extra costs to the production of goods. Iron out any elements that cause delays or dissatisfactions within the production of goods and their delivery to customers. As a small manufacturer, margins will be tighter than larger manufacturers, meaning every second not to mention penny counts. 

Metreel Material Handling UK

In search of solutions to make your manufacturing business more efficient? As part of any risk management strategy for supply chains, having the right tools and equipment is key. 

Metreel is a leading manufacturer of material handling equipment. Based in Derbyshire, we operate not just across the East Midlands but on a global scale. So, if you are in search of the perfect material handling solutions for your manufacturing business you’re in the right place.

You can also download our free brochure to discover more about our product specifications by visiting our product brochure page. If you’re ready to place an order or have any questions, please give us a call on 0115 647 0422 or email us at [email protected].