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Assess risk before making crucial decisions

AMG Logistics

Supply chain directors now need to keep several risks—and reaction plans—top of mind while making crucial choices regarding inventory, demand, logistics, and pricing because of the last year.

Below are some factors to consider:

Stockpiling And Volatility of Demand

Over the past year, several businesses have adopted the practice of stockpiling to reduce demand, make up for transportation bottlenecks, and counteract growing costs. This method, nevertheless, frequently causes more headaches than it cures. Stocking excess inventory entails costs, some of which may wind up being passed on to the customer.

In this case, supply chain executives should focus on a more proactive demand management strategy to assist reduce excess inventory and prevent passing on additional costs to customers. If raw point-of-sale data, social mood, or socioeconomic data are the demand signals that are most important to your company, identify them and agree on the steps you can take to actively influence demand to offset your additional inventory.

The difficulties of the previous year have also shown how dependent businesses in all sectors are on a healthy network of vendors, producers, and logistical service providers.

This ecosystem is frequently global, which can help with supply chain diversification but can also cause bottlenecks and disruptions. These can range from tariffs and political negotiations that affect trade routes to unforeseen weather events or COVID flare-ups that can cause temporary reductions in capacity or factory or border closures.

By incorporating greater agility and insight into their global ecosystem, supply chain professionals may better prepare for unforeseen disruptions. If a supplier has outages or a plant in a particular location close, using end-to-end supply chain management technology to disseminate data across the supply chain in real-time might assist replan. It is simpler to go forward, reduce possible danger, and alter direction quickly.

Logistics and freight

Making assumptions about freight capacity, driver and warehouse availability, or associated expenses at the beginning of the year is no longer an option, even though it might have worked in the past. Instead, supply chain executives must deal with rising shipping volumes, rising diesel prices, a capacity crunch, and a driver shortage—and that’s without even taking into consideration unforeseen interruptions.

When paired with real-time visibility, strong forecasting skills may assist supply chain management more correctly estimate their freight needs and make trade-off choices to expedite or change lanes. Additionally, they may utilize more precise forecasting to decide on price and promotions that can influence key buying windows and prevent a future logistics crisis.

Impacts of interactions and scenarios

These hazards are regularly scored or evaluated separately, but they never frequently compound together. Because traditional risk management strategies frequently don’t take interaction effects into account, firms are more vulnerable when their frequently linear, discrete assumptions interact and lead to results that are much higher or lower than expected.

Business leaders may comprehend prospective interactions and get ready for disruptive possibilities by using a sophisticated and customizable scenario management method that relies on recognizing “potential” interactions and elevating them for CXOs to consider.

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AMG Logistics is a Lagos-based TRACE certified logistics company. Our services include Freight Forwarding, Customs Clearance, Trucking, Distribution, and Warehousing within Nigeria.

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