Supply chain risks can come in many forms, abruptly disrupting operations. A seaport could become congested, a trade policy may require new suppliers, or low consumer demand might result in inventory overstock. From the COVID-19 pandemic to the new U.S. tariffs, recent events have made it clear that enterprises cannot assume their supply chains will always remain stable. In fact, they should always prepare for the worst to limit the damage from potentially disruptive crises. To mitigate supply chain risks, companies must leverage effective Supply Chain Risk Management (SCRM) strategies. SCRM is essential to identifying supply chain vulnerabilities, including internal bottlenecks, supplier issues, geopolitical changes, regulations, and other factors.
Much crucial supply chain data are difficult to acquire, often being siloed off by enterprises or hidden by governments. However, technology has progressed to the point where more potential risks can be integrated into SCRM. Case in point, technology providers now offer SCRM solutions that act like a control tower.
ABI Research expects a significant surge in SCRM investments over the next 8 years. Our analyst team forecasts an 11X increase in annual spending on SCRM solutions between 2024 and 2032, increasing from US$450 million to nearly US$5 billion.
Key Takeaways:
- Supply chain disruptions are inevitable but manageable. Enterprises must adopt proactive supply chain risk management strategies to identify vulnerabilities from geopolitical shifts, regulatory changes, and supplier dependencies before they escalate into costly crises.
- Data integration is the foundation of effective SCRM. Combining proprietary, specialist, and public data into unified platforms enables real-time visibility, risk detection, and digital twin modeling for faster decision-making.
- Agility and collaboration drive resilience. Companies that share data openly, map multi-tier suppliers, and act swiftly on disruptions will minimize downtime and maintain competitive advantage in an unpredictable global environment.
Which Supply Chain Risks Need to Be Mitigated?
Global supply chains face various risks, spanning geopolitical instability, regulatory compliance, inventory costs, supplier sourcing, data security, and more. While all enterprise companies aim to gain supply chain visibility, different industries have different monitoring priorities. Table 1 identifies the top supply chain risks that companies can mitigate with SCRM solutions in five key industries.
Table 1: Supply Chain Risks That SCRM Solutions Can Mitigate in Five Key Industries
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Automotive |
Healthcare & Pharmaceuticals |
Defense |
High Tech |
Food & Beverage |
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Anomalies can cripple just-in-time delivery processes |
Strict compliance and regulations pressure suppliers and transporters to digitize |
A volatile geopolitical environment creates a need for supply chain flexibility |
Supply chain disruptions or minor losses lead to a higher impact due to niche components |
There are many suppliers, but limited data availability |
|
Fierce competition for resources and parts |
Regulations constantly evolve and differ by region |
A higher standard for data security |
A limited number of raw material suppliers necessitates more procurement planning and analysis |
Perishable goods require real-time visibility and actionable insight |
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Government intervention creates an unpredictable supply chain environment |
Dependence on a limited number of suppliers for some tools and pharmaceuticals |
Tiered sub-contractor network raises barriers to supplier communication and consistent information |
Expensive technology products require robust monitoring capabilities |
More granular data and analytics are needed to comply with food safety regulations |
Integrate Disparate Business Data into Supply Chain Risk Management Platforms
Data collection is at the heart of successfully mitigating supply chain risks. For an SCRM platform to properly evaluate risks and provide actionable guidance, it must analyze both internal and external data across the entire supply chain network. The three types of data to feed into an SCRM solution include proprietary data, specific/specialist data, and publicly available data.
- Proprietary data includes business information unknown to the public or external stakeholders. These data could be anything from a newly closed warehouse to trucking fleet maintenance schedules. Current SCRM platforms typically do not integrate proprietary data, although this will change in the coming years.
- Specific/specialist data are also difficult to obtain. They refer to data related to specific industries, regions, or logistics modes. For example, which air cargo routes does a company usually take? Specific/specialist data are gathered by SCRM solution providers like Portcast, BlueBox Systems, and Strider Technologies.
- Publicly available data are the easiest to integrate into a supply chain risk assessment framework. They include data from media outlets or the Internet, such as weather conditions, government records, and geopolitical news. Many risk management solutions pull public data through Artificial Intelligence (AI)-powered web scraping tools.
Once these data are gathered, you can achieve the pinnacle of supply chain risk management: create a supply chain digital twin. This digital twin, referred to as a “network map,” provides an organization with an overview of all the risks it should be on the lookout for. This way, companies receive alerts when something is amiss, prompting them to issue a quick remedy. A network map, enabled by SCRM software, can be the difference between sustained logistical flow and costly downtime.
Supply Chain Risk Mitigation Strategies to Prevent Disruptions
Supply chain risk management offers significant value for businesses, but creating a successful implementation strategy is no easy feat. It requires transparency with SCRM solution providers, data sharing from suppliers, and a certain mindset toward risk analysis tools. To mitigate risks, I recommend the following six best practices to mitigate supply chain risks:
- View risk management as a method for driving supply chain cost savings.
- Map suppliers and sub-tier suppliers to enable large-scale supply chain optimization.
- Leverage SCRM tools to gain visibility into Tier Two, Tier Three, and beyond, and integrate them with existing visibility systems.
- Prioritize agility over resiliency to detect disruptions early and secure alternative supply or transport ahead of competitors.
- Share more data to foster open integration between your SCRM provider and other internal or partner solutions.
- Collaborate directly with suppliers to verify that data remain accurate and current, minimizing the risk of outdated information impacting SCRM effectiveness.
We live in an unpredictable world. Today’s status quo could become yesterday's news very quickly. But SCRM solutions help build clarity and supply chain resilience in the face of often unforeseen headwinds. To take a deeper look at the best SCRM strategies and the technology solutions available to you, download ABI Research’s Supply Chain Risk Management Solutions presentation.
Frequently Asked Questions
What is supply chain risk management?
Supply chain risk management (SCRM) is the process of identifying, assessing, and reducing risks that could disrupt the flow of goods and services. It helps organizations prepare for events like supplier delays, policy changes, or market instability to keep operations running smoothly.
How can organizations mitigate supply chain risks?
Organizations can mitigate risks by improving visibility across suppliers, sharing data openly, and using supply chain risk management platforms to monitor disruptions in real time. They can also build digital twins of their supply networks, collaborate closely with partners, and prioritize agility to respond quickly when issues arise.
What is the primary goal of supply chain risk management?
The main goal of supply chain risk management is to maintain business continuity and reduce the impact of disruptions. By detecting risks early and acting quickly, companies can avoid costly downtime, protect revenue, and stay competitive in changing global markets.