SUPPLY CHAIN MANAGEMENT

OVERCOMING THE RISK

FACTORS CAUSING FINANCIAL
DECLINE OF INDUSTRIES IN
MODERN ERA
EXPLANATION
SUPPLY CHAIN MANAGEMENT
All operations that take raw materials through many stages of transformation into finished items
are part of the supply chain, which supply chain management professionals manage. In this
context, supply chain management is actively simplifying a company's supply-side activities to
increase customer value and provide the company with a competitive edge (Hugos, 2018).

FINANCIAL RISKS
The potential for suppliers to be exposed to a business environment that endangers their financial
well-being is what we mean when people talk about the financial risk associated with the supply
chain of industries in modern era. The procurement and accounts payable departments of
industries in modern era are responsible for managing their exposure to these financial risks and
the impact they have on the business. Supply networks are subject to a variety of financial
dangers (Gurtu & Johny., 2021). An occurrence of financial risk can take place for a variety of
reasons, including but not limited to the insolvency of a supplier, the volatility of the market, and
many others.

 Supplier bankruptcy
 Market volatility
 Foreign exchange
 Budget overruns
 Inflation
 Legal issues
 Reputational harm
 Operational incidents
 Expenditures that were not anticipated

MANAGING FINANCIAL RISKS

Critical Elements of a Comprehensive Insurance Plan for Vendors

For two reasons, verifying that any SCM suppliers’ industries in modern era work with are
adequately covered by insurance is essential. First, that way, they will not have to worry about
legal or financial ramifications that might hinder their capacity to fulfil contractual obligations.

Maximised Uptime and Backup Suppliers

To prevent market dominance by a few large providers, ERM principles should be used.
However, some industries in modern era may advocate for a single bidder to receive the contract
to a catastrophe, such as the insolvency of the provider to whom the contract is granted, that plan
functions as intended (Truong Quang & Hara., 2018). Therefore, two factors must be guaranteed
when choosing a supplier: The Supplier has many production facilities to provide uninterrupted
supply in the event of a plant shutdown. The second step is to single out many suppliers, one of
whom will serve as the primary and the others as backups; these two suppliers need not be
physically close. With this strategy in place, it will be easier for industries in modern era to deal
with any emergency.

Procuring Transparency into the Financial Stability of Suppliers

Most industries in modern era lose when their suppliers suddenly cut off their supplies because
of money problems since they did not ask enough questions upfront. Moreover, internet data is
unreliable because it relies on information from these large supply firms. It is not cheap for
procurement departments to hire a firm to gather information about their suppliers.

The Importance of Conducting Thorough Assessments of Operational Suppliers

Despite the importance of giving suppliers feedback on their performance, many industries in
modern era fail to do so (Gurtu & Johny., 2021). If a vendor does not get regular updates on their
performance, they could fool themselves into thinking everything is all right when it is not. For
example, utilising the Pareto Principle, leading organisations have begun classifying their
suppliers depending on how much money they spend or the level of risk they are allocated.
LIST OF REFERENCES
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.

Gurtu, A. and Johny, J., 2021. Supply chain risk management: Literature review. Risks, 9(1),
p.16.

Truong Quang, H. and Hara, Y., 2018. Risks and performance in supply chain: the push effect.
International Journal of Production Research, 56(4), pp.1369-1388.