4 Ways to Reduce the Global Supply Chain Risks
Friday, June 15, 2018
In our globalized economy, where so many finalized products are comprised of components that are manufactured all over the world, the importance of effective and efficient supply management cannot be undermined. Each party in the supply chain depends on other parties. If one of these inter-dependent parties ever fails to execute its responsibilities, the consequences can spread both upwards and downwards throughout the supply chain. The severity of circumstances can even lead to legal complications. However, such risks can be mitigated if some preventative steps are taken. Here are four essential ways to reduce the risks faced by the parties involved in a supply chain.
1 - Knowing You Supply Chain Neighbor
Manufacturers need to know their material suppliers and as well as the distributors who distribute and sell their products. Similarly, the retailers, distributors and suppliers also need to know the manufacturers they work for. When these parties maintain a cooperative working environment most of the problems related to their supply chain can be solved effectively. These parties should practice due diligence before they form business ties with each other to check whether the parties they’re dealing with are reputable and capable of delivering what they’re promising or not.
2 - Creating Comprehensive Contracts
Failure to implement comprehensive contracts may leave a manufacturer completely exposed to unnecessary liability. If the manufacturers do not have any protection or legal rights against the responsible party, then they might be at the mercy of the regulations and laws of other jurisdictions. Thus, it’s very necessary for the manufacturers and the other parties of the supply chain to prepare robust contracts that define the rights and obligations of each party in the supply chain.
3 - Maintain Insurance
Many times it so happens that manufactures and suppliers find themselves underinsured or uninsured in the claims related to product liability and other supply chain disputes. Such claims can amount to millions of dollars, so it’s imperative for all the involved parties to get them insured against such risks.
4 - Home Court Advantage
Dealing with foreign supply chain parties may pose some specific challenges for domestic parties, like slow communication, being exposed to foreign legal regimes, and difficulty in gaining access and control of the required documents. All these factors are quite risky for North American manufacturers. However, the best way to mitigate risks that you face while dealing with foreign supply chains is to secure the home court advantage by choice of court, choice of law, or by adding arbitration clauses in the contracts or terms and conditions.
After considering these global supply chain risks, handing over the management of your supply chain to logistics companies that have reasonable experience and skill to take care of your supply and distribution network, may seem like a rewarding decision. Moreover, the smooth operations of the logistics companies also keep the customers satisfied. At Gateway Logistics Inc., we understand what consistent, speedy and secure transportation of goods around the world means to the businesses. Thus, we find the finest solutions to administer your logistics regardless of the size and type of your products.
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