Natural disasters, employee illness, market changes, financial issues – there are so many things that could disrupt your business. And these complications don’t have to occur even close to your office to have an impact – they could happen to one of your suppliers.
While this may seem like a rare occurrence, 75% of companies experience at least one major supply chain disruption every year, according to PwC and the Business Continuity Institute.
You might work with five suppliers or 500. What’s essential is that you have a resilient supply chain so you can keep your business running, no matter what. Follow these tips to help minimize your supply chain risk.
1. Carefully select suppliers.
Choosing the right supplier is key to protecting your supply chain.
Price is always a major consideration, but the cheapest option may not always be your best bet. An ideal supplier has a strong business continuity plan and can tell you how they will interact with your business if there is an interruption. Learn what man-made and natural risks could affect the vendor’s business, as well as how they are managing these risks.
Plus, you always have the option to have multiple suppliers. While working with just one vendor can be convenient, having multiple suppliers may decrease the impact of a disruption.
2. Know the signs of supplier trouble.
Make sure you have a close relationship with your supplier so that you know about any issues as soon as they arise. Watch out for lengthening cycle and delivery times, upper-level management changes and low responsiveness. These all can signal that there’s a major disruption on the way.
3. Make a backup plan.
As part of your overall business continuity plan, you should evaluate all of the ways an interruption with a supplier could affect your business and how you can respond. Prioritize your suppliers and identify workarounds based on the specific issues and risks that come with each vendor. It also is wise to have a contract with a backup supplier, in case there is no other alternative.
In addition, you may want to consider purchasing business interruption insurance. It covers the loss of business income if you were to experience a disaster, and it typically includes coverage to help you recover if one of your suppliers suffers a covered loss. Speak with an independent agent to learn more and determine the best insurance options for your business.
4. Don’t forget your downstream chain.
It’s easy to think about how a disaster with your suppliers could affect your business. But, remember, you may have businesses relying on you and your products to run their businesses, too. An interruption with your business, or even one of your suppliers, could affect your customers’ supply chains.
While you look for low-risk qualities in a supplier, like an airtight backup plan and impeccable risk management, remember to include those in your business practices as well. And consider how you can keep your downstream supply chain intact if there’s an interruption.
For most businesses, a supply chain disruption is unfortunately inevitable. Choosing the right suppliers and establishing a thorough backup plan can equip your business to handle any break in your supply chain when it happens.
This article is for informational and suggestion purposes only. If insurance policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies. To learn more about business interruption coverage, speak with us.