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supply chain risk management (SCRM)

This definition is part of our Essential Guide: The essential guide to supply chain management best practices
Contributor(s): Matthew Haughn

Supply chain risk management (SCRM) is the coordinated efforts of an organization to help identify, monitor, detect and mitigate threats to supply chain continuity and profitability.

Threats to the supply chain include cost volatility, material shortages, supplier financial issues and failures and natural and manmade disasters. SCRM strategies and software help an organization foresee potential issues and adapt to both those risks and unforeseeable supply chain disruptions as quickly and efficiently as possible.

Jason Busch and Sherry Gordon of Spend Matters ( a global content network dedicated to procurement and supply chain issues) suggest the following best practices for supply chain risk management:

  1. Automate processes involved in supplier risk management (SRM) to collect, analyze and manage supplier information.
  2. Include supplier performance information in your analysis for insight into potential financial issues.
  3. Identify red flags that may indicate problems and use technology to automate their early detection.
  4. Integrate SCRM platforms with procurement and supply chain management (SCM)  software systems including software for spend visibility, e-sourcing, purchase-to-pay, contract management and compliance.
  5. Provide dashboards that track and report on supply risk metrics to give the executive team access to real-time observations into risk factors.

SCRM  may require collaboration and coordination among an organization’s sales, marketing, production, development, procurement,  finance and IT departments.

This was last updated in June 2016

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