Managing supply risk is a must for SMEs

Supply problems arising from events such as pandemics, natural disasters, geopolitical tensions, have had global impacts on companies: market positioning, cash flow management, access to finance, financial stability. It becomes imperative to manage supply risks proactively, creating a view of the company in which to place undesirable events that may potentially occur and allow rational, non-emergency management to avoid incurring serious difficulties.

Half of the Italian companies still do not use an organic system for the evaluation of their supply processes, one third use unstructured tools, the rest do not practice any risk monitoring. The practices adopted show a strong dependence on the nature, objectives and size of the enterprise. The large ones developed important solutions, in some cases even resorting to Artificial Intelligence methods when the complexity of the data required innovative algorithms to extract usable information for the procurement professional.

Smaller companies, on the other hand, show an overall unpreparedness for the complexity and burdensome nature of the issue, and find themselves in difficulty due to their size and lack of sufficiently standardised practices to adopt. The problem is particularly acute in the manufacturing sector, whose activities are particularly exposed to extremely volatile supply markets. The problem must be tackled with the conviction that supply risk management is a fundamental commitment to protect the company, and with the search for solutions that are consistent with the reality of an SME: sustainable in terms of available budget and ability to plan adequate staff training.

A possible way forward may be the use of incremental practices with scalable solutions: planning a virtuous path with a hierarchy of objectives that correspond to gradually increasing levels of orientation capacity in the company's risk map. Scalability makes it possible to settle on an intermediate level balanced between sustainability of the investment and effectiveness in combating the company's main risks.

Analysing business processes to identify the main risk elements is the indispensable first step. First, the undesirable events, each with its own causes: delays, interruptions, waste, safety stock, non-delivery, quality degradation. Then the actors involved in each event: the suppliers, with whom to associate risk factors such as financial soundness, operability, compliance, certifications; the purchasing materials, each with potential risk factors such as single source, production origin, availability, patents, which often represent the greatest threats to business continuity. Just think of the case of semiconductors and electronic components, materials present in almost all manufacturing sectors. The types of events, causes, actors and risk factors identified can be classified in a taxonomy, a formalised knowledge base of the risks that require attention and their location in the supply chain.