Besides the health and economic devastation that the COVID-19 pandemic has left in its wake, it has also caused supply chain disruptions that have affected a number of industries.
The fallout for companies of all types illustrates the fragility of most businesses' supply chains. The pandemic has left retailers with half-empty shelf space because product manufacturers couldn't keep operations going due to raw material or personnel shortages, while a number of carmakers and other manufacturers have had to suspend operations because of a global semiconductor shortage.
But it's not only large companies that suffer, and small businesses are especially vulnerable. That's why it's important that you have in place a solid plan for averting and dealing with disruptions to your supply chain if you rely on materials and inputs from outside vendors.
Here's what you can do to manage this growing risk.
Understanding your supply chain
You should start by identifying the risks within your supply chain and developing ways to mitigate them. This process should be documented in your risk management plan, which is part of your overall business continuity plan.
There are four main types of external supply chain risks, which are largely out of a business's control:
Developing a plan
The best way to manage a supply chain disruption is to prepare for it. Start by undertaking a business impact analysis to prepare your company.
Form a team of key personnel that should include shipping and receiving, and management and supervisors involved in your key processes. The team should:
Examine the likely fallout and build contingencies:
The final backstop: insurance
You can address supply chain risks through business interruption insurance or contingent business interruption insurance.
Business interruption insurance, which is often included in a commercial property policy, covers lost profits after a company's own facility is damaged by an insured peril.
Contingent business interruption insurance is often a policy rider that you can purchase. It covers lost profits if an insured peril shuts down a critical supplier, part of the transportation or distribution chain, or a major customer. Contingent business interruption coverage is triggered if there is: