Why is it important to de-risk the supply chain?

Businesses face supply chain risk, which can cause delays, increased costs, and loss of revenue. To de-risk the supply chain, businesses should identify potential risks and develop mitigation strategies.

In a globalised world, businesses depend on suppliers from different countries, making disruptions far-reaching and potentially damaging.

Mitigating supply chain risk is especially important for Bangladesh's manufacturing industry to remain competitive and continue its growth. Implementing risk management strategies can help businesses operate more efficiently, reduce costs, and increase customer satisfaction.

Overall, de-risking the supply chain is essential for businesses to thrive and contribute to the growth of the economy.

Minimising the potential risks in the supply chain is essential for Bangladesh to maintain the progress and competitiveness of its manufacturing industry. Here are some steps that Bangladesh can take to de-risk its supply chain:

DIVERSIFY SUPPLIER BASE:

Diversifying the supplier base can help Bangladesh avoid supply disruptions caused by natural disasters, political fluctuations, or pandemics. For example, the Covid-19 pandemic highlighted the risks of relying on a single supplier or region. To mitigate such risks, Bangladesh can source inputs from multiple countries and reduce its dependence on a single supplier or region, such as China.

DEVELOP CONTINGENCY PLANS:

Industry leaders can develop contingency plans to manage supply chain disruptions effectively. These plans can include stockpiling essential materials, identifying alternative suppliers, and establishing backup logistics routes.

Several countries have taken steps to de-risk their supply chains and can serve as examples for Bangladesh. Some countries that have implemented effective supply chain de-risking strategies include:

Japan: After the earthquake and tsunami in 2011, Japan implemented a supply chain risk reduction strategy that included diversifying its supply chain, promoting domestic production, and adopting advanced technology solutions. The country also established a database of suppliers that included information on their location, capacity, and vulnerabilities to supply chain disruptions.

Germany: The country's focus on supply chain resilience has been highlighted in recent years, particularly in response to the Covid-19 pandemic. In 2020, the government introduced the "National Action Plan for Business and Human Rights," which includes measures to address supply chain risks related to human rights violations.

Bangladesh can de-risk its supply chain by learning from other countries' strategies. A strong partnership between industry leaders, policymakers, and other relevant parties is crucial to creating a comprehensive risk management plan.

Supply chain professionals are essential for managing and mitigating risks in the supply chain. They can analyse data and trends to identify potential risks and develop risk management plans. They work with other stakeholders to ensure successful implementation of these plans.

De-risking the supply chain can indeed contribute to increasing bottom-line profits for businesses. When a company's supply chain is disrupted due to unexpected events, it can result in production delays, increased costs, and lost sales, ultimately affecting the bottom line.

A robust supply chain can improve a country's international competitiveness and attract foreign investment. Managing supply chain risks benefits businesses and can contribute to economic growth by reducing disruptions and improving efficiency. This can create jobs, generate revenue, and boost the country's economy.

Mohammad Ashraful Islam Khan is head of supply chain advisory services at Management Consulting KPMG Bangladesh. Khan is also a management consultant who is passionate about growth strategy, operations, fintech and supply chain. He can be contacted at khan.ashraful@gmail.com