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Preparing for supply chain disruptions
The best way to manage a supply chain disruption is to prepare for it. You should undertake a business impact analysis to prepare your business to address the impacts of supply chain disruption.
A business impact analysis identifies your key business processes, and the activities and resources you need to operate your business. It assesses how these key elements will be affected by supply chain interruptions highlighted in your risk management plan.
The degree of impact on your business will depend on the severity and length of the disruption, but most disruptions will have a financial effect.
Disruptions can be internal, such as a breakdown of vital machinery, or external, such as interruptions to the flow of raw materials or parts to your business. The business impact analysis allows you to measure how supply chain disruptions may affect business activities, including financial management.
For example, if vital machinery breaks down and disrupts production, the impacts on various business activities could include:
- inventory management of raw materials and finished goods
- supplier relations
- ordering and purchasing
- sales and revenue
- marketing aspects including customer relations and business reputation
- financial management.
By identifying the key business activities affected by disruptions to your supply chain, you can prioritise your efforts to focus on those activities that would have the most impact on your bottom line.