Any supply chain consists of the different activities that transform natural resources, raw materials, and components into a finished product to be delivered to an end customer. In the case of the electronics supply chain, it typically involves the procurement of raw materials and equipment, development of product that is either shipped directly to a customer or to another link in the supply chain to be assembled into the larger product.
When any level of the supply chain fails to deliver on their part of the process or service to the next step in the chain, your entire supply chain can come to a screeching halt. The smallest hiccup in this complex structure of a supply chain creates large amounts of risk:
- Reduced or stopped revenue.
- Slower time to market.
- Inflated costs – OT, freight, expedites in other parts of the supply chain.
- A damaged business reputation and customer confidence – often the hardest to overcome, and the most costly.
How to Identify Supply Chain Risks
The sooner and more aggressively you can address the risks of your supply chain, the more significant your competitive advantage will be over your competition. In the world of electronic subcomponents, especially printed circuit boards, when the competition is fierce, this agility becomes more important.
The most successful way to limit your impact of supply chain disruptions are by identifying where the weakest links in the chain are and having a plan to mitigate them. In my experience, the largest challenges to any supply chain are the external risk. These are outside your control. Not only are they the most unpredictable, they are the ones that cause the most damage
Managing External Supply Chain Risk
There are five types of external risk that can impact your business both up and down your supply chain:
- Demand: Caused by unpredictable or lack of understanding by customer demand.
- Supply: Caused by any interruption to the flow of product from raw material to finished product across the supply chain
- Environmental: Out of all of our control, could include economic, social, government, and climate factors. This is one of the larger risks to most electronic supply chain(s) as the majority of the raw materials and subcomponents are built in South East Asia, a geography that has a very violent climate.
- Business: Caused by the financial management of the organizations within your supply chain, or the purchase and sale of the organizations in your supply chain. Again, this has been a large factor in the PCB supply chain in the U.S. over the last 20 years as more organizations merged to stay in business. The latest and biggest example being the merger of TTM and Via Systems.
- Physical: Caused by how well your supply chain maintains their facilities and their
The challenge with planning for external risks is that you have no control over when and where it will happen. There are some ways that you can protect your supply chain even from the forces of nature.
As you are putting together your risk management plans, some things to keep in mind to protect yourself:
- Inventory Management Plans: Any type of Blanket, Kanban or Consignment inventory programs will help you limit your exposure to a supply chain shutdown.
- Supplier Relationships: Developing long term supplier relationships take hard work, time, and dedication. Without that relationship that is based on volume of work, payment terms, onsite and face to face meetings, it becomes more difficult to keep production in tact during any of these risks
In closing, it is impossible to predict every risk that your supply chain is exposed to. The only way to manage that risk is to be prepared for as many of the known risks as possible. As our world, governments, and economies become increasingly complex, organizations like ISO are not only including risk management as part of the certification but are making it one of the main portions of your certification. While none of us have a crystal ball that can predict the next typhoon or coup, we can learn from the past, build in redundancies, and protect our exposure to risk to the best of our abilities.