What does risk mitigation in supply chain management entail?

Risk mitigation in supply chain management is fundamentally about implementing strategies that minimize the impact of identified risks. This involves recognizing potential risks that could disrupt the supply chain and then developing specific plans or actions to reduce the likelihood of those risks manifesting or to lessen their effects if they do occur.

For example, if there's a risk of supply disruptions due to reliance on a single supplier, a company might mitigate this risk by diversifying its supplier base or pre-establishing alternative sourcing options. Similarly, companies may establish contingency plans, such as maintaining safety stock or creating flexible logistics arrangements, to ensure that they can respond quickly to unexpected events.

This approach is central to ensuring supply chain resilience and stability, allowing organizations to navigate uncertainties effectively and maintain continuity in their operations. In contrast, increasing suppliers, reducing lead times, or increasing inventory levels are more about operational adjustments rather than specifically addressing the broader spectrum of risks and their mitigation strategies.