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Understanding Supply Chain Risks

Posted by Goldin Peiser & Peiser on Oct 28, 2013 3:41:00 PM

In the wake of recent natural disasters, many insurance underwriters are requesting more and more information from risk managers regarding their manufacturing supply chain.  It is important to look at a few key strategies that will help you lower the risk should something catastrophic happen along your supply chain.

Underwriters know, generally, the insured’s supply chain loss, but it does not always know which supplier or customer is more likely to have an interruption.  It is then up to the risk management team to research this information.  In order to gain this knowledge they will need to get input from the individuals who interact with these suppliers and customers on a daily basis.  Risk management must remember that they will need to educate the individuals on gathering this information as this is something they have never had to do before.

When looking at supplier risk review, ask the following questions:

• Are the supplier’s facilities well protected?
• How quickly could they reestablish production, and are there plans to do so?
• Does the supplier have multiple manufacturing sites and excess capacity to draw from, and where on the priority scale do you fall relative to their other customers?
• Are there proprietary technologies or processes involved?
• Are there alternative products or suppliers that can be substituted without compromising quality or performance of your product?

On the other end of the supply chain are your customers.  As with the supply side of the equation, a customer can also expose you to contingent risks if located in disaster prone areas.  When examining their risk, consider a few of the following questions:

• Will your customer be able to arrange an alternate delivery site for products?
• What does the customer do with your product after delivery?
• Is your product a component of your customer’s final product?

Manufacturers should be looking closely at their supply chain risks and plan accordingly.

To read the entire article, please visit IndustryWeek.com.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Manufacturing