Recognizing the Value of Supply Chain Risk Assessment

As global supply chains grow more complex, manufacturers are placing greater emphasis on building long-term resilience. A wide range of factors can disrupt operations, and relying solely on cost-focused strategies is no long sufficient to maintain continuity in the face of uncertainty.

To effectively optimize their supply chains, manufacturers must be able to identify, evaluate, and mitigate risks across the entire network. A thorough risk assessment helps uncover potential threats and vulnerabilities while also revealing opportunities to strengthen operations and drive innovation.

Risk Management Self-Assessment Tool

For smaller manufacturers, supply chain challenges are rarely straightforward. With numerous upstream and downstream dependencies, issues can't be viewed in simple black-and-white terms. While cost remains an important factor when selecting suppliers and customers, it is no longer the sole consideration. Today, manufacturers must balance cost efficiency with risk management and overall supply chain resilience.

Conducting a self-assessment is essential because reducing uncertainty often comes with tradeoffs and added expenses. As a result, many manufacturers are beginning to view supply chain risk through a business insurance lens, investing upfront to protect long-term stability.

An end-to-end supply chain visibility self-assessment (see example provided below) examines the three stages of product flow alongside three levels of business execution:

• Business Execution
  
  • Strategic - Yearly
  • Tactical - Monthly
  • Operational - Daily
• Product Flow
  
  • Upstream - Suppliers
  • Internal - Production
  • Downstream - Channels

For each area, the tool poses three key questions, allowing manufacturers to quickly determine whether an initiative has not yet begun, is in progress, or is fully established. This approach provides a clear snapshot of supply chain maturity while also revealing insights into broader value chain development, including product lifecycle management, market, and customer segmentation, and distribution strategies.

With limited resources and competing priorities, manufacturers must be strategic about where to focus their efforts. This self-assessment tool offers a practical starting point, helping organizations identify gaps, prioritize actions, and support sustainable growth.

Tip for Manufacturers: Create a Balanced KPI Scorecard

In the past, key performance indicators (KPIs) often took a back seat in supply chain management, as the primary focus was simply securing materials and components. Today, however, even a single imbalance in the supply chain can disrupt operations entirely. A well-designed KPI scorecard should strike a balance between quantitative and qualitative data and focus on two to three critical metrics, such as supply chain risk and quality performance.

KPIs should align with industry standards, such as responsiveness and on-time delivery (OTD), while also being customized for individual vendors. Clear visibility and open communication, both internally and externally, are essential. KPIs must also be weighed and adjusted dynamically, as they offer valuable insights but often function as lagging indicators.

A supplier scorecard can be used to:

• Measure performance and drive continuous improvement
• Identify which suppliers should remain in your supply base
• Strengthen negotiation positions
• Develop suppliers into strategic partners
• Reward high-performing suppliers using objective data
• Build consensus around strategic supplier relationships

At Manufacture Nevada, our Business Advising team can support manufacturers across all aspects of supply chain management, helping them operate proactively with greater situational awareness of potential backlogs, economic conditions, and market dynamics.

Different Approaches to Supply Chain Risk Management Planning

Many small and medium-sized manufacturers only develop community plans after experiencing a significant disruption. For some, recent supply chain challenges have been that turning point, forcing shutdowns of product lines, or, in more severe cases, halting operations altogether.

A supply chain risk management plan does not have to be complex to be effective. Even a basic SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) can provide valuable insight, as long as it considers a broad range of business factors. These include workforce considerations, parts and suppliers, IT systems and cybersecurity, operations, competitive pressures, and other critical areas of the organization.

Supply Chain Risk Management Action Checklist

Mapping your supply chain and evaluating risks and opportunities can generate a significant amount of data, but without clear direction, it doesn't always translate into greater flexibility or preparedness. To help manufacturers turn insight into action, MIT Sloan Management Review recommends a set of practical steps for small manufacturers across seven key areas:

1. Expand Capacity
   • Invest in low-cost, decentralized capacity for predictable demand
   • Build centralized capacity to manage unpredictable demand
   • Increase decentralization as capacity costs decline
2. Develop Redundant Supplier Networks
   
   • Use redundant suppliers for high-volume components
   • Limit redundancy for lower-volume parts
   • Centralize redundancy for low-volume products through a small number of flexible suppliers
3. Improve Responsiveness
   • Prioritize cost efficiency for commodity products
   • Emphasize responsiveness for products with short life cycles
4. Optimize Inventory
   • Decentralize inventory for predictable, lower-value parts
   • Centralize inventory for less predictable, higher-value items
5. Increase Flexibility
   • Favor cost efficiency over flexibility for predictable, high-volume parts
   • Prioritize flexibility for low-volume items with uneven demand
   • Centralize flexible operations when operating multiple locations is costly
6. Aggregate Demand
   • Increase demand aggregation as variability and uncertainty grow
7. Strengthen Capabilities
   
   • Prioritize capability over cost for high-value, high-risk components
   • Focus on cost for low-volume commodity items
   • Centralize high-level capabilities within flexible sourcing strategies when possible

How Manufacture Nevada Can Help

At Manufacture Nevada, we support manufacturers by providing hands-on guidance, technical expertise, and access to resources that strengthen operations and build long-term resilience. Through assessments, consulting, and customized improvement plans, Manufacture Nevada helps companies identify risks, implement practical solutions, and adopt technologies that improve productivity and competitiveness within your small or medium-sized manufacturing business. Learn more and schedule a free consultation with our Business Advising team today.

This blog content is sourced from Impact Washington.