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Supply Chain Risk Management

A complex supply chain is essential to your business operations, but also poses risks for your company.

To meet ever-changing requirements and hold their ground in the face of global competition, industrial companies today must rely on increasingly complex supply chains. This not only brings benefits in efficiency and costs, but also involves other, ever-increasing risks:

  • The interaction of different parties and flows of goods and information along the supply chain can aggravate local imbalances in supply and demand (the bullwhip effect).
  • For suppliers, the heavy pressure to cut costs and frequently changing, market-induced requirements often lead to unreliable quality and delayed deliveries.
  • There is a growing risk of supply shortages for strategically important components and commodities.
  • The increasing volatility of prices in key energy and commodity markets is an obstacle to cost and liquidity planning.

 

 

 

Get rapid clarity about the major risks along your supply chain.

Our experts are trained to identify all key risks facing your business quickly and systematically. We apply tried and tested concepts developed in cooperation with our academic and industry partners, enabling us systemically to identify and quantify even hidden links and risks along your entire supply chain with the use of key risk indicators (KRIs).

 

In doing so, we focus on:

  • Price and currency risks linked to procurement or sale of energy, chemical products, metal components and agricultural commodities that either cannot or cannot fully be passed on to customers,
  • Volume risks caused by uncertainty over supply, production and sale volumes, and
  • Counterparty risks due to possible default on payments by customers or failure of performance, delays in deliveries or quality defects on the part of vendors.

We go on to analyse key external indicators that can have an impact on your business, such as market dynamics and macro-economic factors. This allows us to produce a thoroughly researched assessment that identifies and presents the results in priority order in the form of a risk matrix.


Based on these results, the next step is to work with our customers to identify an initial set of effective and practical measures to limit your exposure to high-priority risks.

Stay in control. Active supply chain risk management will keep you one step ahead of your competitors.

Every risk also presents an opportunity. The aim of effective risk management is to identify and evaluate risks at an early stage and to limit them by taking appropriate measures - or to use your knowledge of the market consciously to turn those risks into opportunities. A customised risk management system that meets your needs can therefore deliver significant strategic benefits.

 

Starting with your own business strategy, our experts can work with you to define a tailored risk strategy. that sets out the aims of your risk management system and the measures required to achieve those aims.

 

As the next step, d-fine can explain how to measure and monitor the main supply chain risks facing your business continuously in line with your risk strategy. Together, we would then choose the best solutions, based on strict cost/benefit criteria without theoretical ballast.

 

In doing so, we focus on:

  • Indicators such as sensitivity, profit-at-risk and cash flow-at-risk in order to identify possible deviations from your established P&L and cash flow forecasts,
  • Early warning indicators such as in relation to suppliers, especially with regard to the statutory requirements of KonTraG (German Control and Transparency in Business Act), and
  • Scenario analyses and stress tests that improve the transparency and clarity of risk as well as providing other valuable information.

Finally, we can help you identify and implement appropriate measures and tools for an effective and practicable system of operational risk management. These include:

  • Active supplier management, especially the use of scoring processes for the selection and diversification of suppliers,
  • Improvements to information exchange along the supply chain,
  • Standardisation and if necessary automation of essential processes,
  • Reduced complexity in purchasing and product portfolios and, if necessary, introduction of substitutes,
  • Standardisation and harmonisation of contractual pricing agreements on the procurement and sales side,
  • Linking of physical price agreements to commodity indices,
  • Safeguarding procurement and sale prices through the use of energy and commodity derivatives,
  • Flexible use of storage capacity for commodities, and
  • Use of limit systems based on commodity positions and indicators.

The selection of measures and tools should be based on proper evidence of their efficacy. This can be obtained using suitable procedures such as historical back-testing.

 

To ensure that they function reliably and efficiently in practice, your processes, organisational structure and system landscape need to be enhanced and properly coordinated in a targeted and cost-efficient manner. If required, we can work closely with your partners to design and implement those enhancements at whatever level of detail is appropriate - from conceptual design to the choice of system and implementation.

 

Read more:


Multi-Tier Supply Chain Risk Management: Practices and Perspectives

 

 

For detailed information on our references and our approach in the domain of supply chain risk management, call us on +49 69 907370 or email us at info@d-fine.de with the subject line “Supply Chain Risk Management”.