How Small Manufacturers Can 

Develop Risk Management 

Strategies for their Supply Chains 
Table of Contents

Introduction 

Responding to Impacts and Preparing For What Comes Next

Mapping Your Supply Chain Network

Self Assessment Tool for Supply Chain Risk Management

Supply Chain Risk Management To-Do List

Supply Chain Management: A Component of 

Manufacturer Resilience

Your Trusted Advisors For Supply Chain Management

01

03

05

07

09

11

13
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 1

As a smaller manufacturer, you continue to be more vulnerable to global supply chain disruptions than larger 

companies. Having to pay more for materials, parts or shipping is a difficult dynamic as you may not be able to 

absorb short-term losses or even a lower margin. But cost becomes less important if you can’t deliver a product, 

and as uncertainty has been magnified, it is now essential for you to manage risk by preparing for and adapting to 

unexpected disruptions in order to increase your resilience and be responsive to customers. 

In many ways the disruptions show how small manufacturers are more critical than ever. Many big companies are 

looking for additional domestic sourcing and do not want to take on additional liabilities and capital investments 

from bringing more in-house. Those companies also are looking for trusted relationships in their supply chains that 

will work with them to provide added value from sustainable solutions and even product development. 

A key aspect of being a trusted supplier and providing sustainable solutions is being resilient. Resilient 

manufacturers operate with situational awareness of all aspects of their business environment, from their 

supply chain inputs, to their in-factory processes, to their customer and market outputs. Resilience doesn’t just 

mean reacting to catastrophic changes to remain in business. Rather, resilience means being proactive about 

understanding and anticipating all kinds of inevitable change and putting in place the strategies and tactics that 

allow a company to be both stable and agile at the same time.

It starts with risk awareness that can be realized by conducting assessments of the 

full system of business operations: inputs, processes, and outputs. Systems-based 

risk awareness allows a company to understand challenges in their supply chain, 

in their factory, and with their customers and markets – before those challenges 

become pressing problems – and manage them accordingly. 

This includes pricing and costing. 

Many small manufacturers are now looking at more than just the per unit price. They are now looking at the total 

cost of ownership (TCO) in their supply chains and asking how they can add value for their customers. Part of the 

strategic shift is from manufacturers realizing that the costs are considerable for freight, tariffs and time. Looking 

at the true cost via the TCO approach rather than at just the per unit purchase cost can help you better evaluate 

sourcing.

Introduction

 

Risk management is key
2 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

Many manufacturers are pursuing domestic sourcing for materials and supplies as a way to overcome supply chain 

disruptions. There are substantial long-term benefits to reshoring including:

1. Reliability: Overseas suppliers means living with tariffs, global politics and economies and natural 

disasters in faraway places. 

2. Trust: It’s easier to establish a relationship with common languages, cultures and proximity, and 

relationships become critical during disruptions. Relationships are key in understanding if a supplier 

can grow with your business and innovate alongside you. 

3. Business Ethics: Concerns about overseas suppliers with intellectual property (IP), knockoffs and 

tooling are well documented. The U.S. has some of the strongest IP protections in the world, so working 

with a domestic supplier decreases the chances of IP theft. 

It’s difficult and time-consuming to build and maintain relationships, but growth 

in domestic sourcing will come from medium and larger manufacturers who invest 

more in smaller domestic suppliers to solve shortages and other arising issues. 

It’s an important part of the reshoring mindset.
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 3

Responding to Impacts and Preparing For 

What Comes Next

The global supply chain crisis has evolved from a cascading series of events that began with the 

shutdown of factories in China at the onset of the COVID-19 pandemic. Subsequent changes in buying 

behaviors and shifting demands have led to a variety of disruptions, including shortages of materials, 

parts and components, which in turn created shipping backlogs and bottlenecks that have impacted 

almost every industry.

The dynamic quickly shifted from the tactical, problem-solving approach to focus on resilience and becoming more 

strategic. The biggest increase is in multi-sourcing, which adds redundancies as an additional source of a supply to 

minimize risk while increasing options. But supply chain experts also are seeing an interest in relying, long-term, on 

domestic supply sources. 

Shifting from a reactive to proactive approach requires a continuous cycle of risk mobilizing, sensing, analysis, 

configuration, and operation. This will help optimize results while mitigating risks. In essence, the questions a 

manufacturer asks in a dire, problem-solving scenario are similar for reshoring as reactive problem solving:

z Can we go without?

z Can we substitute it? 

z Can we build it?

z Can we re-tool or get someone else to re-tool to produce it?

Mobilize

Sense and prioritize new

risks and implications to your

supply chain components/

services and ecosystem

Analyze what-if scenarios

and protocols for source, plan,

make, distribute and service

implications

Mobilize the command center

and (initial) response plan. 

Establish operating rules for

responses related to all supply

chain interventions and

contingency management

OPERATE

Execute the plan

and follow results

Sense

C

o

n

figure

Analyze

Source: Accenture, How to Respond to Disruption

Underpinned by a digital and analytics backbone
4 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

Manufacturers should seek to improve their overall resilience and move from reactive to proactive with long-term 

contingency plans, multi-sourcing to build in redundancy, and rating their existing suppliers. The benefits for 

manufacturers who source from within the U.S. are extensive and include:

z More transparency and control of their supply chains, which can improve quality control, flexibility and time 

to market, while lowering supply chain risk that often comes from offshore production.

z Producing near the consumer often reduces total costs by shortening supply chains and contributing to a 

lean and agile strategy, with reduced waste.

z Tapping into a large network of local and regional supply chain stakeholders, from your local MEP Center, 

to trade, economic development and workforce development organizations and local and regional government agencies that might have timely incentives. 

How the MEP Can Help: The Importance of Relationship Capital

Relationship capital is the value of a manufacturer’s relationships with its 

customers, suppliers, vendors and stakeholders in the marketplace. It is difficult 

and time-consuming for manufacturers to build and maintain relationships, but 

success in sourcing will come from manufacturers who invest in strengthening 

supplier relationships. Many manufacturers are now looking for more reliable 

domestic suppliers to solve their shortages. 

Your local MEP Center has experts who can help manufacturers find new sources 

of supplies, which is not easy for many resource-challenged manufacturers 

that are occupied with their own operation and deal in relatively narrow 

networks associated with their specialties. Local MEP Center staff reach out to 

their expansive networks of manufacturers – locally and nationally, state and 

regional economic development organizations, and trade groups to raise the 

manufacturer’s visibility.

MEP 

Tips for

Manufacturers

Lessons Learned: Don’t Fall Into the Low-Cost Trap

Many manufacturers work hard to reduce uncertainties in their operation. They often focus on cost, 

which is a known quantity. Costs are the reason manufacturers use overseas suppliers to begin with 

– materials and workforce are typically less expensive in Asia on a per unit cost basis. But “cheaper” is 

where innovation and value go to die. Competing on cost per unit makes you replaceable. 

It is not sustainable.
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 5

Mapping Your Supply Chain Network

Manufacturers can map their supply chain to gain better visibility into those organizations’ 

exposures and opportunities. The most common approach to mapping is to use the “bill of 

materials” to drill down on the top five products by revenue, looking at component suppliers 

and raw material suppliers. A supply chain mapping process might look like this:

z Learn where suppliers and their suppliers are located

z Research your suppliers to understand inherent risks associated with the company and external factors

z Conduct a risk assessment

Once you have a good idea of your top-tier sites, start looking at the sites that supply to them.

Experts suggest analyzing as many tiers as possible in the supply chain, because there may be hidden critical 

suppliers that manufacturers are not aware of. The network map should include:

z Primary site activities performed at the supplier

z Alternative sites the supplier has that could perform the same activity

z How long it would take the supplier to begin shipping from the alternate site

Using domestic sourcing for materials and parts instead of overseas suppliers means risk mitigation begins much 

earlier in the entire process. The shorter distance a part or material must travel, and the fewer touchpoints involved 

and the less potential uncertainty. 

What Supply Chain Disruptions Have Taught Us About Lean Manufacturing

“Just-in-Time” inventory is a popular concept in lean manufacturing which is meant to lower cycle times, 

reduce waste, and increase productivity. But that concept is not nearly as relevant now as it appeared 

to be years ago. The reality is that risk has always been a significant factor in supply chains. The current 

dynamic requires flexibility and risk management. It’s not that lean principles don’t apply anymore, 

but the right question to ask may be “what’s the healthiest approach for us right now?” Continuous 

improvement should be the overarching mindset.
6 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

How MEP Can Help: Supplier Scouting

The fast-changing supply chain dynamics have led to a greater demand 

for supplier scouting – which is essentially identifying sources for domestic 

products and capabilities. The MEP National Network Supplier Scouting 

program works like this: a manufacturer seeking a new supplier contacts its 

local MEP Center, which shares the details and technical requirements of the 

opportunity across the MEP National Network — 51 MEP Centers located in all 

50 states and Puerto Rico, with over 1,400 trusted advisors and experts at more 

than 385 MEP service locations. 

Local MEP Center staff, through their own best practices, scout for domestic 

manufacturers within their state that have the capacity, capability, and interest 

to meet the immediate need. Results are aggregated from input provided 

by MEP Centers across the nation and sent to the sponsoring MEP Center so 

they can start a dialogue with the potential suppliers. MEP Centers facilitate 

company interactions.

MEP 

Tips for

Manufacturers
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 7

Self Assessment Tool for Supply Chain 

Risk Management

Supply chain issues rarely can be viewed as black and white by smaller manufacturers because there 

are so many dependencies, both upstream and downstream. While cost will always be a critical 

factor in finding both suppliers and customers, it’s no longer the main consideration. Manufacturers 

are now looking at how they can balance cost with risk and supply chain resilience. 

This self assessment is necessary as reducing uncertainty comes at a cost. There are always tradeoffs. Supply chain 

issues now are being viewed in somewhat of a business insurance mindset.

An end-to-end supply chain visibility self assessment (see example below) will cross reference three stages of 

product flow with activities from the three lenses of a business plan. 

The self assessment tool includes three questions for each aspect of the assessment. A manufacturer can quickly 

see if it has yet to begin addressing the area, it is a work in progress or it has an established approach or plan. This 

reveals a snapshot of not only the supply chain but also the value chain development, such as product lifecycle 

management, market and customer segmentation and distribution management. 

There is no question that resource-challenged manufacturers have many choices when it comes to focus and 

attention for ensuring the growth and sustainability of their business. The self assessment tool is a great starting 

point to help them prioritize needs. 

Product flow:

z Upstream - suppliers

z Internal - production

z Downstream - channels

Business model execution:

z Strategic - yearly

z Tactical - monthly

z Operational - daily 
8 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

How the MEP Can Help: Build A Balanced KPI Scorecard

Key performance indicators (KPIs) used to be an afterthought for supply 

chains as securing materials or parts was the emphasis. But one imbalance 

in a supply chain can make everything else irrelevant. Keep in mind that 

a balanced scorecard is a mix of quantitative and qualitative data. Your 

KPIs should measure 2-3 key metrics such as supply chain risk and quality 

performance. Your KPIs should use industry standards where relevant including 

responsiveness, on-time delivery (OTD), etc. and should be tailored by vendor. 

Visibility and clarity in communication is a must both internally and externally. 

It’s essential to properly weight KPIs in a dynamic nature as they provide 

insight but are lagging indicators. 

Key uses for a supplier scorecard include:

• Measuring performance and driving improvements

• Justifying which suppliers to keep in your supplier base

• Strengthening a negotiating position

• Developing suppliers into better partners

• Rewarding good performers based on objective data

• Gaining consensus on strategic relationships

Your local MEP Center experts can help you with all aspects of supply chain 

management and show you how to proactively operate with situational 

awareness of potential backlogs, the economy, and the state of your market. 

MEP 

Tips for

Manufacturers

The Many Approaches To A Risk Management Plan

Small and medium-sized manufacturers often only have a continuity plan if they have experienced a 

major disaster. For many, the current disruptions have been that disaster, forcing them to shut down 

a product line or worse. A risk management plan can be as simple as a SWOT analysis (Strengths, 

Weaknesses, Opportunities, and Threats), provided it takes into account a wide swath of the business, 

such as people, parts and supplies, IT and cybersecurity, operations, competitors, etc. 
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 9

Supply Chain Risk Management To-Do List 

Mapping your supply chain and assessing your risks and opportunities will provide you with a mountain 

of information but not necessarily a roadmap for what to do next to increase your flexibility and 

readiness. The MIT Sloan Management Review suggests an action list for small manufacturers based on 

these seven areas:

z Increase capacity

• Focus on low-cost, decentralized capacity for predictable demand

• Build centralized capacity for unpredictable demand

• Increase decentralization as cost of capacity decreases

z Transition to redundant suppliers

• Utilize redundant suppliers for high-volume parts, less redundancy for lower-volume parts

• Centralize redundancy for low-volume products with a few flexible suppliers

z Increase responsiveness

• Prioritize costs over responsiveness for commodity products

• Prioritize responsiveness over cost for short life cycle products

z Increase inventory

• Decentralize inventory of predictable, lower-valued parts

• Centralize inventory of less predictable, high-valued parts

z Increase flexibility

• Prioritize cost over flexibility for predictable, high-volume parts

• Prioritize flexibility for low-volume parts with uneven demand

• Centralize flexibility in a few locations if it is expensive to operate locations

z Aggregate demand

• Increase aggregation as unpredictability grows

z Increase capabilities

• Prefer capability over cost for high-value, high-risk parts

• Prioritize cost over capability for low-volume commodities

• Centralize high capability in flexible sourcing if possible
10 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

Thinking Outside The Box For Possible Solutions

Smaller manufacturers are increasingly using unconventional approaches to solve problems. The “think outside of 

the box” mindset was born out of necessity but now is prevalent for some companies. Some examples:

z Consider capabilities of other manufacturers outside of (but near) your industry - A small manufacturer 

that was challenged with packaging yarn found a supplier that worked with cables and wiring.

z Take stock of other local manufacturers and their needs or capacity - A manufacturer found success by 

approaching the largest manufacturer in the region to ask about their supply needs. 

z Explore funding mechanisms that could help you retool or pivot to meet demand - Incentive programs 

often are available to help manufacturers invest in technology to ensure job retention or growth. 

Possibilities include direct subsidies from big companies to state grants and tax-exempt bonds.

How the MEP Can Help: Linking Supply Chain To Business Strategy

Your local MEP Center has experts who can help you align your supply 

chain with desired business outcomes:

z Have you aligned your supply chain with business goals? Manufacturers should integrate their sales, inventory and operations planning 

(SIOP) programs with their budget and forecasting effort. This is a cycle 

of forecasting, demand planning and capacity planning. The demand 

plan begins with a forecast from sales, how it fits into company goals 

and capacity issues. This impacts material requirements. Knowing what 

is in the pipeline every month helps decision makers share knowledge about risks and what risks may be tolerable. The operations side 

uses the demand plan to create a supply plan that considers both the 

capacity and resources available. They may go back to sales and ask to 

validate the forecast, which is confirmed or adjusted.

z Can your suppliers grow with your business? Does the supplier have 

the capacity to meet your current needs and would they be able to 

accommodate an increase in your business? Is the supplier financially 

stable? Some external indicators of financial risk include losing customers, lawsuits, or the loss of key personnel. You should also consider 

if a supplier is a good fit for your company. If you place smaller orders, 

would your supplier prioritize other orders ahead of yours – possibly 

leading to production delays?

z Can your suppliers innovate alongside you to meet new designs? 

Finding suppliers who understand their role in the product life cycle is 

critical to supply chain integration and strategy. Meeting production 

standards at the right price doesn’t necessarily equal long-term value. 

The competitive advantage in the supply chain is the ability to respond 

to changing customer demands.

MEP 

Tips for

Manufacturers
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 11

Supply Chain Management: A Component of 

Manufacturer Resilience

As previously introduced, improving a manufacturer’s resilience positions them to be 

situationally aware of potential changes to all aspects of their business environment including 

their supply chain, in-factory operations, and customer and market demand. Smaller 

manufacturers can take a series of strategic steps to both reduce exposure to disruptions and 

increase capabilities to achieve growth without negatively affecting profitability. 

Comprehensive situational awareness of the full range of business components allows a manufacturer to plan 

and put in place integrated strategies and tactics that provide proactive protections and responsiveness through 

appropriate risk awareness and management. Resilience improves competitiveness, while simultaneously enabling 

sustainability of business operations.
12 | RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS 

For manufacturers to be resilient, they need to be proactive and responsive. Supply chain disruptions will 

likely continue well into the future. From our experience, about 80 percent of small to medium-sized manufacturers are reactive, but they see the need to be more proactive and are taking steps to find long-term 

solutions that reduce their supply chain risks.

• Fragile, needing to recover: Short-term actions to address crises as they occur, with little planning and 

strategy setting. For example, dealing with recurring staffing problems, health and safety issues, factory 

disruptions, supply chain gaps, and immediate financial needs.

• Responsive, but not proactive: Short- and middle-term actions that protect against recent problems, 

but lack strategies and planning to create stability and long-term competitive advantage and 

sustainability.

• Proactive, but vulnerable: Short- and middle-term actions to target and capitalize on opportunities, 

but lack strategies and planning to create stability and long-term competitive advantage and 

sustainability.

• Responsive and proactive, resilient: Ongoing and long-term actions with situational awareness to 

implement integrated strategies and tactics that enable sustained agility of operations with a 

competitive advantage.

Manufacturing Resilience Grid

Ability to 

recover from 

disruptions

in a timely 

manner

Ability to capitalize on opportunities in a timely manner
RISK MANAGEMENT STRATEGIES FOR SUPPLY CHAINS | 13

Your Trusted Advisors For Supply Chain 

Management 

For many smaller manufacturers, sourcing supplies from Asia is not adding enough value to 

warrant the risks. Among the many uncertainties facing smaller manufacturers is when, or even if, 

the supply chain will return to its previous level of stability. Having few alternatives to ocean freight 

is just one of many reasons that experts are predicting supply chain issues may last into 2023. Even 

then, higher ocean freight costs may be here to stay.

The efforts to find domestic sourcing are shedding light on the many benefits that small and medium-sized 

manufacturers might not have considered in the past, such as total cost of ownership and innovating alongside 

their suppliers. Supply chain management experts at your local MEP Center can help you with supply chain 

challenges and find domestic suppliers and capabilities, not just locally but at a national level. They are trusted 

advisors who understand the challenges that smaller manufacturers face when it comes to supply chain 

management.

Contact your local MEP Center
100 BUREAU DRIVE M/S 4800

GAITHERSBURG, MD 20899

PHONE: (301) 975-5020

EMAIL: MFG@NIST.GOV

WEB: WWW.NIST.GOV/MEP

The MEP National Network is a unique public-private 

partnership that delivers comprehensive, proven solutions 

to U.S. manufacturers, fueling growth and advancing U.S. 

manufacturing. 

Focused on helping small and medium-sized manufacturers 

generate business results and thrive in today’s technologydriven economy, the MEP National Network comprises 

the National Institute of Standards and Technology’s 

Manufacturing Extension Partnership (NIST MEP) and 

51 MEP Centers located in all 50 states and Puerto Rico.