Five Techniques to Manage Supply Chain Risk

Risk has always been part of the supply chain. It’s a reality inside and outside the four walls of any organization. It’s no surprise then that as Enterprise Risk Management (ERM) programs proliferate, they have naturally begun to address anticipated and unanticipated events occurring both upstream and downstream in the supply chain.

Upstream of an organization are the suppliers who create goods and services used in a company’s own operations. These include raw components or materials that flow into direct manufacturing as raw materials. There are also indirect products and services that facilitate the company’s actual operations.

The downstream supply chain efficiently distributes a company’s products or services to its customers. All contracted suppliers, both upstream and downstream, must be proactively managed to minimize financial, confidentiality, operational, reputational and legal risks.

You don’t have to look any further than recent headlines to see potential fallout here. Did Equifax have proper data liability insurance coverage in place before 143 million accounts were hacked? And even if they did have coverage, how much was their reputation and customer account credibility damaged? This is still playing out, so not even Equifax management yet knows the impact of the risks taken.

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Globalization Creates New Avenues for Supply Chain Risk: riskmethods Shares its Predictions for 2016

As part of our ongoing series on what procurement technology providers see as the biggest challenge for procurement in 2016, we recently spoke to riskmethods to hear its thoughts on the topic. Heiko Schwarz, riskmethods founder and managing director, pointed to increased external risks, globalization and regulation compliance as the main issues procurement and supply chain managers will have to tackle in the new year.

These three major trends will expose organizations to risks in 2016, Heiko said. External risk will continue to be an issue. For example, extreme weather such as rain or snow storms will expose and disrupt supply chains even more than in the past, he said. Political risks have been a growing trend for years, but will continue in 2016 as well, he added.

Globalization is also pushing enterprises to search for new suppliers in countries or regions they probably have not worked in before. Procurement’s scope in the last year has dramatically changed, going from a “domestic-centric” view to a more global one, Heiko said. Specifically, he believes we will see movement away from China as the cost of operating there continues to rise. China is no longer a low-cost sourcing country, and this is putting pressure on companies to move to new areas, places such as the northern regions of Africa, he said. This globalization push will put increase supply chain complexities in 2016.

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Tianjin Catastrophe Reinforces Need For Supply Chain Risk Management

A recent University of Tennessee-sponsored survey of leading supply chain executives helped quantify the continued apathy surrounding the proper assessment and management of supply chain risk. For starters, the survey found that none of the companies surveyed use third parties to independently assess their risk, 90 percent don’t even quantify the risk themselves, and while 66 percent acknowledged the existence of corporate officers focused on managing legal compliance, none of these same professionals touched the supply chain.

If HR can be directed to manage against the cost of a potential employee discrimination suit, how did global companies get to a place where they still don’t see the wisdom in protecting themselves against a potential supply chain disaster?

The Port of Tianjin, China’s third largest, just blew up. For companies that rely on that port and that didn’t have a crisis playbook in place, the lessons they’re about to learn could be fatal. If you saw the video of the explosion and are even remotely familiar with Chinese industrial accident rates (70,000 lives lost each year) then you know that the Chinese media is under-reporting the story and that “business as usual” at the Port of Tianjin is likely on indefinite hold.

But here’s the rub: if the Longshoremen at the Port of Long Beach decided to strike unexpectedly next week, the business effects for those without contingency plans could be strikingly similar. That’s how tenuous multi-tier supply chains can be.

Supply chain risk management (SCRM) is defined as “the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity.” It’s yet another operational discipline that technology has recently enabled to new heights, as the ripple effects of a catastrophic supply chain event are not intuitive. In fact, they’re usually mind-boggling.

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China’s supply chain plan could pose threat to Taiwan

A plan laid out by Chinese authorities to cultivate a domestic supply chain for the country’s high-tech manufacturing sector is expected to pose a serious threat to Taiwanese companies, government sources said Saturday.

In voicing the concerns, Ministry of Economic Affairs sources said China’s efforts to help its own high-tech supply chain flourish to lower dependence on imported parts have already reduced China’s trade dependence on Taiwan.

The plan unveiled by Beijing in May to create a manufacturing revolution underpinned by smart technologies over the next 10 years could deal a further blow to Taiwan’s exports, they said.

The latest plan for the mainland to grow its own high-tech sector, called “Made In China 2015,” takes aim at various sectors, including the information technology, and puts a heavy emphasis on the semiconductor segment.

According to figures compiled by the Bureau of Foreign Trade (BOFT), the ratio of China’s imports from Taiwan to total imports fell to 7.76 percent in 2014, from 11.3 percent in 2005.

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Top fashion labels save millions from China’s sustainable supply chain

A leading group of Chinese textile mills, which create clothing for major high-volume apparel brands and retailers including Target, Gap, Levi Strauss and H&M, are saving $14.7 million each year by adopting simple efficiency measures in their production processes, according to a new analysis by the US Natural Resources Defense Council (NRDC).

These improvements have dramatically reduced the pollution generated by these mills, cutting up to 36 percent of water use and 22 percent of energy use per mill and a total of at least 400 tons of chemicals.

The 33 mills are part of NRDC’s Clean By Design program, a global model for manufacturing sustainability that is working with major fashion retailers and designers to green the fashion supply chain industry-wide.

“Great fashion can also be green fashion. Although apparel manufacturing is among the largest polluting industries in the world, it doesn’t have to be,” said Linda Greer, Ph.D., NRDC senior scientist and director of Clean By Design. “There are enormous opportunities for the fashion industry to clean up its act while saving money, and Clean By Design offers low-cost, high-impact solutions to do just that.”

Over the past two decades, China has become the epicentre of global manufacturing, and it currently produces more than 50 percent of the world’s fabric, totalling more than 80 billion meters annually.

As a result, the country is suffering from increasingly serious pollution problems while also contributing significant carbon into the atmosphere. Textile manufacturing, particularly the dyeing and finishing of fabric, is incredibly water and energy intensive as the process swallows up to 250 tons of water for every 10,000 meters of fabric produced and consumes 110 million tons of coal every year.

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It’s 2015, Are You Ready for the Chinese New Year?

It’s 2015, Are You Ready for the Chinese New Year?

According to the Chinese zodiac calendar, 2015 is the year of either the Goat, Sheep or Horned-Animal (i.e., Ram). You may designate either animal, as you think best.

But whichever one you choose, Chinese New Year (CNY) is nearly around the corner, and transpacific shippers must once again prepare themselves for the inevitable annual impact it will have on their supply chain operations.

Chinese New Year or Spring Festival is the biggest holiday of the year in China. This year, the Chinese New Year begins on February 19, and most Chinese will have eight days or more of vacation, commonly referred to as Golden Week.

Because this traditional holiday brings families together to celebrate the New Year, it is common for many companies to extend their shutdown periods prior to and after CNY to allow employees to travel home to celebrate with family.

Customary activities include fireworks, red decorations, the New Year’s Dinner and an exchange of red monetary envelopes. But the planning for CNY goes beyond these traditional celebrations as transpacific shippers have come to grasp the real effects of the extended holiday period. Let’s examine some things to consider:

  1. Take the opportunity to communicate your production deadlines early in order to avoid potential delays.
  2. The increase in inventory and the pressure to get those goods underway prior to the CNY shutdown can create a backlog of goods awaiting export from Chinese ports.
  3. Some factories may also not experience a 100-percent return of their workers until after the holiday – further extending the time to return to full capacity.
  4. Shipments should arrive at the ports no later than 10 days prior to the CNY in order to ship before the holiday.
  5. It is particularly wise to book shipments two weeks in advance to ensure space on vessels.

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Asia Pacific leaders to boost supply chain performance by 10 per cent

Asia Pacific leaders to boost supply chain performance by 10 per cent

Political leaders in Asia Pacific have pledged to improve the performance of supply chains in the region by 10 per cent by the end of 2015.

At the Asia Pacific Economic Cooperation (APEC) leaders’ meeting in Beijing, China this week, the region’s politicians committed to building capacity and offering technical assistance projects to meet the target. They also welcomed the establishment of the APEC Alliance for Supply Chain Connectivity to support the aim.

A declaration following the summit also called for increased resources for the APEC Supply Chain Connectivity Sub-Fund to be able to meet this goal. A network has also been set up to work on making supply chains more sustainable.

The leaders also promised to implement the World Trade Organization’s Trade Facilitation Agreement, which aims to speed up the movement of goods around the world and details co-operation measures between customs and authorities.

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Supply chain management is gaining focus in China

Supply chain management is gaining focus in China

We attended the Supply Chain Executive World Summit in Shanghai in September and were struck by the recent advances in supply chain management (SCM) in China. Not so long ago, in our line of work, we had trouble getting Chinese businesspeople to consider the SCM body of knowledge and how their enterprises could benefit by applying it. Now, it is quite clear that the tide has turned.

Until recently, it seemed to us, the typical Chinese business person was more worried about increasing capacity and simply satisfying demand through brute effort. Few took the time to see how SCM principles and practices could help them satisfy demand, nor were they worried about achieving cost reductions. Given the prevailing correction in the Chinese economy, they are becoming more thoughtful about such matters.

The key in retail is SCM.

China is ideal for e-commerce because there is a huge population and traditional retail is not as developed as in other large countries.

Business to Consumer (B2C) is developing the most quickly for Yihaodian, which has built good credibility in the field, while the mobile internet is enabling shopping anywhere, anytime.

Via e-commerce, the company can cover the whole country 24/7, with limitless storage and offerings. In future, with mobile, it will be able to penetrate more third- and fourth-tier cities.

The “internet of things” will drive people more and more to e-retail, cloud services, online finance, market segmentation and personalisation.

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The Story Of Alibaba

The Story Of Alibaba

A massive Chinese company, Alibaba, is about to have what could be the biggest public offering on planet earth. You can think of Alibaba like Amazon or Ebay, except you can buy way more — you can get a used 747 airplane, or an oil tanker, or 500 million tiny screws. On the show, the company that made it possible for anyone anywhere to build almost anything they want. What that company means for China, for the rest of us and for some chickens in California.

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