28th September, 2021
COVID-19 has changed a lot of processes in business, while revealing changes required in many others, such as our global over-reliance on opaque supply chains.Not knowing who’s in your supply chain – or perhaps having the ability to even find out – is causing big concerns worldwide.
Whatever your business, the past two years have demonstrated that being able to access in-depth data about your supply chain partners (and even their partners) is essential for using data-led insights that will assist you navigate through any future disruptions, no matter how they materialise.
Whether it’s physical disruptions from COVID-19 or disruptions caused by cyber threats, such as the SolarWinds events, business leaders today face a heightened risk environment, with experts predicting business owners should anticipate material disruptions to their operations every 3.7 years, at least.
These disruptions have meant that mitigating supply chain risk and effective supply chain management have become much more important skills to master. As such, business leaders are aware that they need to implement supply chain management techniques and security measures to mitigate those risks and keep their businesses moving forward in a changing world.
At the end of the day that means educating yourself on supply chains and relying more heavily on data-led insights.
In this article:
In short, supply chain risk is a measure of how vulnerable a line of supply is to a shortfall, which has knock-on implications for the businesses that rely on it.
In recent years, supply chains have grown in length and complexity as businesses have chased increased profit margins. Businesses that can achieve a lean, global supply chain find themselves with the benefits of improved inventory levels, on time deliveries and shorter lead times.
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These supply networks are designed to achieve maximum efficiency, cost, and proximity to markets. The problem is that they are rarely transparent, or, as we have seen recently, resilient. They worked when the world was on an even kilter, but when things started going wrong, a large majority of companies couldn’t manage those upheavals.
These upheavals included, and will continue to include pandemics, financial crises, geopolitical disruptions, terrorism, and extreme weather events.
Issues like these cause lean businesses to be the most exposed — finding themselves, and more notably, points in their supply chain — to be highly vulnerable.
Each supply chain — or value chain — will be vulnerable in its own way. For example, the aerospace industry is susceptible to cyberattacks because of their high level of digitisation and exposure to digital data flows (among other reasons). But it is less exposed to value chain disruptions from flooding, for example.
On the other hand, the automotive industry is vulnerable to the shortage of semiconductors (made only by a few companies in Taiwan) caused by the pandemic.
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Understanding where your business is vulnerable to risks is vital when understanding your supply chain risks. Shocks to your business will identify those risks for you, but it’s much better to understand and mitigate those risks, as well as establish continuity plans, before you’re forced to.
The goal of supply chain security, or supply chain management, is just that—to identify the risks that are built into working with other businesses, and then analyse and neutralise them as much as possible. When doing this it’s important to recognise that supply chain security involves both physical securities, for products, and cybersecurity, for software and data protection services.
Strengthening supply chain security depends on your industry, your business and whether it’s a physical supply chain or a digital value chain.
When it comes to physical vulnerabilities, organisations may track shipments or employ several vendors to ensure a steady supply of commodities. They may physically attend a factory site and even run background checks on personnel. They may log and track shipments, use automated notifications for the sender and receiver, use locks and tamper-evident seals during shipping and use only accredited or certified suppliers, among many other steps.
When it comes to cyber threats, companies minimise risks by utilising software from one company, while securing organisational data with another. They attempt to secure supply chains by reducing their reliance on foreign suppliers. And they put into place and enforce best-practice baselines of vendors and resellers, authenticate all data transmission, and identify requestors, use permissions or role-based access to data, regularly audit open source and vendor source code and train employees to be alerted to changes and inconsistencies, and much more.
But these actions alone are no longer enough. When it comes to the global upheavals that have taken place, and those that will continue to happen, businesses need to understand exactly who they’re in business with — and that means comprehensive risk profiles of every company that touches its business’ supply chain.
Mapping a comprehensive risk profile of every company that touches your business may feel out of reach for many organisations. Manual vetting, information gathering and analysing each one of those companies is a massive drain on manpower. But thankfully, that’s where innovative technology comes into its own.
A recent example of this kind of technology can be seen in the integration of Equifax’s credit risk reporting into debtor management platform FeeSynergy to help accounting and legal forms better assess client and supplier risk.
“In the current economic climate, managing the credit risk of customers and suppliers is crucial,” said general manager of Commercial and Property Solutions for Equifax, Scott Mason, said.
“Understanding a client’s risk and ability to pay can help better protect cashflows.”
Accumulating ‘usable data’ has been the goal of most businesses for at least a decade, but just how that data is effectively used by organisations continues to evolve.
As the market gains access to powerful new AI capabilities, competition for the use of data rises. Today, we need to become data led businesses. And that means building AI capability into the foundations of financial reporting, providing analyses and insights that enable timely, impactful decision making.
Today we have access to more information than ever. If you really want to get to greater depths and more understanding when it comes to your supply chain, you must accumulate more raw data and include more specific factors in your analysis. Unfortunately, humans simply can’t compute and analyse that amount of information quickly enough.
Going forward, successful businesses will need to take a different approach. Instead of gathering information and then relying on human-powered decision making, market innovators will be gathering information and relying on AI-powered insights to inform business-critical decisions. Of course, this means that businesses need to develop their digital technology and processes to get to a stage where they can take that leap of faith and relay on that technology.
It’s this data-led insight that can help companies map a truly comprehensive and, ultimately helpful, risk profile of every company that touches their business.
When it comes to supply chain risk management, the companies that are going to come out strong are the ones that can demonstrate to their shareholders, their employees, their business partners, and the public that they have invested in understanding their supply chain and have mitigated any vulnerabilities contained in it. This could include physical disruptions, cyber breaches, ransomware situations, ethical sourcing issues and even labour rights.
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In today’s world it’s no longer enough just to point to a downward or upward chain and say, ‘Here it is!’ You must have instant access to data-driven insights, make quicker decisions based on that understanding (AI supported decisions) and be able to convey those messages to your stakeholders in a timely fashion.
That’s the future of supply chain management and security.
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