Long, fluctuating lead-times and high inventory levels constitute a major risk in the supply chain. The sudden death of a product, price erosion, ambitious forecasts and other factors makes an analysis of supply chain risks and liabilities essential for any company. This is not a trivial effort, as there can be multiple suppliers with contractual liabilities as far upstream as the fifth or sixth tier. Many business decisions directly impact the risks in the supply chain, and these risks should be clearly understood and carefully weighed when such decisions are made.
Key Questions
- Within the current supply chain structure, how much liability, and therefore risk, is there?
- What are the financial impacts of different value chain decisions, such as maintaining safety stocks or pre-building inventory ahead of demand peaks?
- What is the impact of forecast inaccuracies?
- How much extra risk is associated with those suppliers with long and/or fluctuating lead times?
Risk & Liabilities and SimFlex
SimFlex can accurately represent the supply chain structure, including the lead-times and contractual liabilities associated with all suppliers, at any tier. When this is combined with a demand forecast, the result is a transparent and quantified analysis of the liabilities in the supply chain, on a total, company, facility, supplier, product group or product level.