Supply Chain Management
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Do you rely on one or more third-party suppliers to produce certain components used in your products? If you do, a disaster that interrupts your supplier’s regular business operations could have a devastating effect on your production abilities. Not only could an interruption harm your own revenue, but it could also negatively affect your customers.
While you should always try to minimize potential liability through contingency planning and other risk management techniques, as supply chains grow across the globe there may be little you can do about the exposures faced by your suppliers. In a perfect world, you could simply not do business with companies that present numerous risks or that are unwilling to conform to your standards. Realistically, pricing constraints and niche markets can mean a limited number of potential suppliers to choose from.
Supply chain insurance is meant to cover losses you incur as a result of an interruption to your supply chain. Such coverage allows you to work confidently with suppliers who face exposures beyond your control. Coverage is most important for those who directly rely on the production ability of a key supplier for their own operations. If there aren’t alternative suppliers available and you can’t build up a substantial reserve of materials, then you’re at an increased risk for debilitating interruption. Policies are now available that activate on any number of events that cause an interruption such as natural disasters, pandemics, strikes or political unrest.
Policies exist to protect your income during supply shortages; covering revenue loss resulting from reduced output along with other associated costs you may incur as a result of the interruption. Managing risk across the supply chain is a crucial component of a business’s risk management strategy. With advanced planning and continuous monitoring, a company can successfully navigate and manage the effects associated with an interruption. Business owners should actively engage supply chain partners and their broker and insurers to successfully manage a business’s chain risks from the beginning to the end.
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