The same supply chain tactics that make your company lean and profitable can become your downfall in just the blink of an eye.

That’s because the benefits of the drive to improve efficiency — running lean, just-in-time production, single-source suppliers — can also leave you more vulnerable than ever before.

Fortunately, the best solution is easily summed up in two words: Be prepared.

The fancy term for it is “risk management.” Either way, we’re talking about shooting for the same goal.

1. What could go wrong?

The first step in managing supply chain risk (or being prepared), is to identify and catalog the “what-if” problems that could possibly disrupt your operations.

A few to consider include:

• Shifting customer demand
• Changing financial factors, such as credit availability
• Other market pressures, such as your competitors or your supplier’s competitors, and
• Weather, natural disasters or similar problems (think Hurricane Katrina or the California wildfires, for instance.)

2. Profiling your suppliers

At the same time, you should gather material about your own company (think of it like you’re writing a book) that is critical to supply chain continuity.

This means your company’s operations, including production and fulfillment; and data about your suppliers and your customers.

Try profiling your top suppliers, by identifying:

• Who are your key suppliers
• Where they are located
• Is there another site that could fill in if the primary supplier or supplier site fell short?
• What’s their production capacity, and
• What’s their production flexibility? Can they turn on a dime to help you if you asked?

Today’s emphasis on lean production has left many companies dealing with single-source suppliers, without much of a safety net.

3. What else could go wrong?

There’s the flip side of this coin, too.

Does your company rely heavily on a small but powerful customer base? What would happen if one of those customers closed up shop or took its business elsewhere?

Another contingency to consider: Does your supply chain focus efforts on one primary “ship-from” location? Would you be prepared if a disruption put that area out of commission?

Of course, you’re not going to come up with all of the answers right away.

Risk management is an ongoing process. You can never be prepared enough.

But taking the time now to anticipate problems and plan contingencies could make the difference between success and failure for your company in the future.

Tags: credit, customer, lean, production, risk management, suppliers, supply chain