Tag Archives: Risk

The growing importance of supply chain risk management

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The growing importance of supply chain risk management

The growing importance of supply chain risk management

Against the backdrop of a highly disruptive and volatile market environment, supply chain risk management has risen to the top echelons ofboardroom agendas. Vivianne Courte-Rathwell, a Consultant at Sourcing Champions, explains why the concept is gaining importance – and outlines some of its main benefits.

A review of the historic supply chain disruptions of the past few years would hardly be news to anyone. In an unprecedented ‘risky’ period, with a pandemic, climate change, a Russia-Ukraine war, geopolitical pressures, and much more, it is no surprise that global supply chains have recently been dealing with heightened risks.

However, it is key to keep in mind that such disruptions do not only occur in unfortunate periods of history. Risks are by nature ubiquitous and unpredictable, and that means that leaders need to embrace an approach that helps them mitigate, adapt and learn.

In 2012, there was a disastrous tsunami in Japan which impacted the automotive industry worldwide. In 2015, an immense explosion at one of the largest ports in the world, the Port of Tianjin, caused significant costs and losses. In 2018 the US – China trade war negatively impacted profit margins and created tense times of uncertainty.

It is impossible to conceive to avoid all risks. Instead, the key is to mitigate significant damages through foresight in strategic management.

After the tsunami of 2012, automotive organizations had nowhere to turn as many realized that their single source of materials was Japan. Even OEMs with a multi-sourcing strategy encountered issues because many tier-1 suppliers procured materials from the same tier-2 supplier. As a result, the challenges of tier-2 suppliers became a direct concern as well.

Had there at the time been a multi-layer supply chain risk management (SCRM) program in place, these issues could have been (easily?) avoided and impact to the business would have been minimized. SCRM tools and processes act as guardrails and shields protecting the business from potential perils, hence providing a competitive advantage.

Read more at The growing importance of supply chain risk management

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How to analyse third-party risks in the supply chain

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How to analyse third-party risks in the supply chain

How to analyse third-party risks in the supply chain

What are the cybersecurity, financial and other risks posed by third parties in the supply chain, asks Sri Rangachary, a Senior Director with ISG
Do you truly know your exposure to risk? With every third-party supplier an organisation uses, there is increased risk of being exposed to a security breach, a damaging reputational issue, or a human rights or environmental issue that could be buried within the supply chain.

We tend to think of disruptive events as happening once in a lifetime, but in reality, we should plan for them to be a regular feature of supply chains and manage them accordingly. Proper governance and rigorous supply chain review are critical.

What are the risks posed by third parties in the supply chain? The most obvious risks are cyber security or financial. Imagine if one of your supplier’s suppliers has a ransomware attack that spreads up the chain. Your security is only as strong as the weakest link in the supply chain. An event like this could severely disrupt your ability to do business.

But there are less obvious, newer risks from suppliers. Increasingly we’re seeing emerging threats from areas like environment, social and governance (ESG), and human rights.

Perhaps there are modern day slavery practices that you haven’t spotted, deeply embedded in the supply chain, or a supplier has been found guilty of corruption, or other unethical behaviour. It’s not enough anymore to claim ignorance, and you could lose your hard-won reputation by association with such practices.

You need the right processes in place to catch and head off these kinds of issues, early on.

Managing supplier relationships

The key to good supplier management is good information. What information do you need to mitigate your risk? I’m often asked: “How do I assess the risks from my supply chain?” The answer is in the information you get from that chain.

Look first at the information you have internally available. What is the acceptable risk level in your own business? Every organisation will have a different appetite for risk. A risk heat map is a great way to visualise the impact and likelihood of different risk categories, so you can develop the appropriate response.

The role of technology

It’s simply not possible for a person – or even a full team – to monitor every change and movement that could pose risk within the supply chain. This is where technology can help.

A good third-party risk management system can give you the information you need to monitor and mitigate risk, as well as keep on top of contractual commitments and the performance of your suppliers (including their ability to meet those commitments).

Read more at How to analyse third-party risks in the supply chain

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10 Supply Chain Risk Management Strategies

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10 Supply Chain Risk Management Strategies

The supply chain is the gas that makes the motor run for manufacturing and retail. Without it, you have no product to sell, no inventory to stock, and no revenue to earn. Unfortunately, there will always be disruptions to the supply chain that throw everything out of whack and force both retailers and manufacturers to scramble to pick up the pieces. In a Gartner survey, only 21% of respondents stated they had a highly resilient network, though more than half expected to be “highly resilient” within a few years. That’s a positive sign, but what exactly can be done to get ahead of those supply chain risk factors?

Proper supply chain risk management enables businesses of all shapes and sizes to take advantage of tried-and-true strategies that mitigate risk and set them up for success. In order to develop your own risk management strategy, it helps to first understand what supply chain risks you might face.

What Are Some Supply Chain Risks?

Supply chain risk management refers to the process by which businesses take strategic steps to identify, assess, and mitigate risks within their end-to-end supply chain. There are both internal and external risks that can disrupt your supply chain, so it’s helpful to understand the difference between the two.

External Supply Chain Risks

As the name implies, these global supply chain risks come from outside of your organization. Unfortunately, that means that they are harder to predict and typically require more resources to overcome. Some of the top external supply chain risks include:

  1. Demand Risks: Demand risks occur when you miscalculate product demand and are often the product of a lack of insight into year-over-year purchasing trends or unpredictable demand.
  2. Supply Risks: Supply risks occur when the raw materials your business relies on aren’t delivered on time or at all, thereby causing disruption to the flow of product, material, and/or parts.
  3. Environmental Risks: Environmental risk in the supply chain is the direct result of social-economic, political, governmental, or environmental issues that affect the timing of any aspect of the supply chain.
  4. Business Risks: Business risks occur whenever unexpected changes take place with one of the entities you depend on to keep your supply chain running smoothly — for example, the purchase or sale of a supplier company.

Internal Supply Chain Risks

This refers to any supply chain risk factors that are within your control, and that can be identified and monitored using supply chain risk assessment software, robust analytics programs, IoT capabilities, and more. Although internal supply chain risks are more manageable than external ones, they’re still — to some degree — unavoidable. Here’s what to look for:

  1. Manufacturing Risks: Manufacturing risks refer to the possibility that a key component or step of your workflow could be disrupted, causing operations to go off schedule.
  2. Business Risks: Business risks are a product of disruptions to standard personnel, management, reporting, and other essential business processes.
  3. Planning and Control Risks: Planning and control risks are caused by inaccurate forecasting and assessments and poorly planned production and management.
  4. Mitigation and Contingency Risks: Mitigation and contingency risks can occur if your business doesn’t have a contingency plan for supply chain disruptions.

Read more at 10 Supply Chain Risk Management Strategies

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What Are the Benefits of Supplier Quality Audits?

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What Are the Benefits of Supplier Quality Audits?

What Are the Benefits of Supplier Quality Audits?

While you want to trust and count on your suppliers, do you really know for sure that they have the proper procedures in place, that the procedures are being actively applied, and that their employees follow their established procedures?

Supplier quality audits are the process of verifying that each of your suppliers is adhering to both industry standards as set by the law and independent organizations, as well as your own company and brand standards.

Audits are widely recognized as a pertinent part of doing business.

While there are many reasons for this practice, here are the six biggest benefits of performing supplier quality audits.

1. A Reduction of Risk

A significant amount of risk accompanies extended supply chains, outsourcing, and globalization. The risks include:

  1. Quality
  2. Safety
  3. Business Continuity
  4. Reputation
  5. Cost Volatility
  6. Supply Disruption
  7. Non-Compliance Fines
  8. Safety Incidents
  9. And More

2. Better Contractor Management and Business Relationships with Suppliers

Your business can gain ground when costs are reduced, contractor management is streamlined, brand reputation is protected, and long-term profitability is achieved. This is easier done when the following tasks are taken care of efficiently:

  1. Supplier Prequalification
  2. Supplier Audits
  3. Worker Management
  4. Insurance Monitoring
  5. Analytics

3. Expert Guidance on Safety and Sustainability Performance

While you already have strategies in place to manage the health, safety, and behaviors within your own organization, how do you know your suppliers, contractors, and vendors are similarly motivated?

Supplier quality audits actively foster an aligned culture of health and safety through:

  1. Contractor Prequalification
  2. Document Management
  3. Auditing
  4. Employee-Level Qualification and Training
  5. Insurance Verification
  6. Business Intelligence

4. Closer Alignment with Your Compliance Standards

Your business is under pressure to maintain compliance with:

  1. Country-specific regulations
  2. Industry standards and regulations
  3. Corporate policies and standards

5. Better Procurement Decisions

Procurement teams are under a lot of pressure to find, qualify, monitor, and manage suppliers, all while lowering the cost of doing so. With supplier quality auditing, procurement managers can make better and more cost-effective procurement decisions by:

  1. Mitigating risk through communication, evaluation, selection, and monitoring services.
  2. Gaining unprecedented visibility into safety statistics, risk profiles, and historical data.
  3. Reducing lead time and improving efficiency with ongoing guidance and support throughout the procurement process.
  4. Maximizing data quality on the entire supply chain.

6. Sustainable Business Practices

Today, an organization committed to improving the environment through sustainable growth is required to meet both regulatory requirements and societal expectations. Managing the long-term value of your company and its brand is party dependent on properly managing the environmental, social, financial, and economic impacts throughout its supply chain. All of this can be done more easily with thorough supplier quality audits.

Read more at What Are the Benefits of Supplier Quality Audits?

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Coupa Software: four tips for reducing supply chain risk

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Coupa Software: four tips for reducing supply chain risk

Coupa Software: four tips for reducing supply chain risk

The cloud platform for business spend management, Coupa Software, drives “Value as a Service” by helping customers to achieve significant cost savings.

As is the case with every supply chain, there is always risks that must be considered. These risks could be financial, cyber, legal or fraud and business leaders have a responsibility to consistently work to overcome these risks. Coupa has compiled four spend management decisions to help cut supply chain risk.

1. Automate compliance verification

In order to decrease risk in company’s supply chains, organisations must ensure is audit-ready and fully compliant. There’s an importance to ensure every vendor is compliant with relevant standards and observe the tolerance for risk. The process includes checking vendor credit ratings, financial liabilities, legal judgements as well as other details.

2. Utilise the insights of the business community

With some companies undergoing regular checks on its vendors to obtain credit reports from third-party sources, best-of-breed business service management (BSM) technology accelerates this. Based on a range of sources such as income statements, court documents and news articles, BSM algorithms quantifies financial, judicial and public sentiment health of each supplier.

3. Enable real-time visibility for spend-at-risk

Recognising and understand the risk that comes from each supplier is vital to ensuring information is married with the actual spend of the organisation. In the supply chain space, being proactive is key due to the pace of which the world moves. By operating with an agile approach, it allows businesses to adapt to situations that weren’t accounted for, such as trade sanctions, currency fluctuations and natural disasters.

4. Control in-flight transactions to mitigate risk

The importance of supply availability is key. Understanding and identifying these risks before they develop is vital to ensuring businesses protect guard against such threats. BSM processes should enable clear visibility of transactions that are linked with supplier risk.

Read more at Coupa Software: four tips for reducing supply chain risk

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Six Ways To Optimize Your Supply Chain To Generate Profit

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Companies use multiple tactics to generate economic profit, including introducing new products, launching marketing campaigns or undertaking acquisitions. Supply chains offer an effective, though less understood, path to creating value through growth, driving down working capital, improving cash flow and lowering cost.

Surprisingly few companies understand the importance of the supply chain, and few have a formal strategy in place for managing global supply chain risk in the years ahead. This is especially dangerous given the volatility and uncertainty in trade relations between the U.S. and China, as well as other scenarios around the world. Besides geopolitical uncertainty, having the right talent, a holistic perspective and appropriate technology may all figure into the supply chain risk factor.

Use the following best practices to optimize your supply chain and minimize risk.

Redefine The Supply Chain

Best practices begin with redefining supply chain excellence and broadening its scope.

Create A Cross-Functional Team

Best practices for driving shareholder value through supply chain optimization can be easily implemented in any company for concrete results.

Focus On The Right Metrics

Following increased visibility and cross-functional team-making, focusing on the right metrics is the logical next step.

Connect With The C-Suite

Another essential best practice in supply chain optimization is building relationships throughout the entire company and starting conversations with the CFO and other key executives.

Manage Risks

Long-standing supply relationships have value, but disruption of those relationships can be devastating.

Total Value Optimization

The Total Value Optimization (TVO) framework promotes greater collaboration, integration and transparency.

Read more at Six Ways To Optimize Your Supply Chain To Generate Profit

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Four Steps to Building a Global Chain Risk Management Platform

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Be proactive – and significantly reduce global supply chain risks, discover the 4 steps to building a global supply chain risk management platform in a white paper from Avetta.

A global marketplace presents a complex set of challenges, especially when attempting to maintain a safe and sustainable working environment for your employees, contractors, and suppliers.

A minor detail, if left unresolved on the front end, can explode into a financial or operational disaster.

But the implementation of a world-class risk mitigation solution can save time, money, and even lives.

It’s critical to have the plans, resources, and technology in place that verify credentials, measure financial stability, and encourage sustainable business practices.

A proven supply chain risk management partner can ensure that your program is configured efficiently, intuitively, and effectively.

Save your business from negative impacts to its revenue and reputation by taking the right steps to minimize global supply chain risks.

In this white paper from Avetta, you’ll learn the keys to successfully managing your supply chain, protecting it against avoidable situations, and recovering from unforeseen disasters.

Find out how to better equip your business to prevent:

  1. Incidents caused by under-qualified or untrustworthy contractors or suppliers
  2. Injury to employees, contractors, suppliers – and the obligation of medical expenses associated with them
  3. Direct costs such as damaged goods and materials, machinery repair, and insurance deductibles
  4. Indirect costs including revenue loss from brand damage, employee and supplier down time, production delays, and fines

Read more at Four Steps to Building a Global Chain Risk Management Platform

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The Emerging Business of Supply Chain Risk Management

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For many organizations, globalization, outsourcing, and extended supply chains are effective strategies to increase efficiency and achieve economies of scale, however, these benefits are accompanied by the significantly increased risk to quality, safety, business continuity, reputation, and more.

Is Your Company Safe to Work With?

As reported by Forbes, there’s an emerging category of business – supply chain risk management – of which many companies aren’t yet aware.

For the largest companies, this is a jugular area – imagine the exposure of a large oil company or a large online retailer when a supplier they’ve contracted with makes a mistake or even causes an all-out disaster? (Think oil drilling contractor, for example.)

Risk Management Overview

For many organizations, globalization, outsourcing, and extended supply chains are effective strategies to increase efficiency and achieve economies of scale.

However, these benefits are accompanied by the significantly increased risk of quality, safety, business continuity, reputation, and more.

Identifying Risk in the Supply Chain

Organizations are always at risk for losses through cost volatility, supply disruption, non-compliance fines, and safety incidents that cause damage to their brand and reputation.

Knowing what’s at stake is the first step to understanding, measuring, and managing risk in your supply chain.

Supply Chain Safety

Among the highest priorities for companies across all industries, safety concerns are often magnified in chemical, oil and gas, construction, and manufacturing.

Workplace accidents can jeopardize contracts, result in fines, and cause significant damage to a company’s reputation.

Supply Chain Quality Control

Do your vendors and suppliers meet your standards for quality and consistency?

Customers are quick to react when they perceive a drop in quality; and, even the smallest product issues can be difficult to recover from.

Supply Chain Financial Challenges

Any disruption to the supply chain due to financial challenges has the potential to impact business continuity and, ultimately, your bottom line.

Taking a proactive approach to understanding supplier financial strength can prevent disruption and unnecessary costs.

Supply Chain Compliance

Are your contractors insured? Do they have the right type of insurance, the right limits?

Knowing this information will help you to manage insurance risk and avoid potentially costly litigation.

Supply Chain Reputation

Damage to a company’s brand or reputation can be long-lasting, extremely costly, and sometimes unrecoverable.

Committing to a supply chain risk management strategy can not only prevent brand damage but can also serve to foster new partnerships with organizations that share like values.

Supply Chain Sustainability

It’s no longer enough to assess risk within the traditional construct of a supply chain.

Organizations must look beyond and consider environmental impacts and corporate social responsibility, including adherence to labor laws and sustainable practices.

Read more at The Emerging Business of Supply Chain Risk Management

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How To Avoid a Third-Party Break in Your Supply Chain

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Your business is only as secure as the weakest link in your supply chain. A single lapse by a third-party can lead to an operational disruption, cyberattack, or compliance violation. How can you be certain that your vendors and partners are keeping up with the latest regulatory mandates, industry best practices, cybersecurity measures, and your own corporate standards?

Vendor Risk Management Should Be a Top Priority

In these days of high-profile data breaches and intensifying regulatory requirements, supply chain risk management has become a critical priority for every organization. Such programs typically encompass policies, standards, governance, and risk assessment. Vendor risk management falls under the last of these—and it’s the cornerstone of effective supply chain risk management.

Develop a Vendor Risk Policy with Teeth

Nothing gets the attention of a vendor like a withheld payment. To set the expectation that risk policy compliance is a requirement, not an option, let vendors know that no money will be released until the right boxes have been checked.

Document and Track

A supply chain risk register is essential to keep track of your vendors and their risk. Your database should provide a single source of information on which vendors have been approved and when, as well as their current risk assessment rating.

Stay Engaged During Procurement

Don’t wait until the final review of a master services agreement (MSA) to get involved. Build a strong collaborative relationship with the procurement team so you can be notified promptly when a business function submits a procurement request, and stay engaged during vendor sourcing. By getting in front of the process, you can avoid being labeled as a roadblock or deal-breaker.

Maintain, Scale, and Repeat Your Program

Running an effective vendor risk management program and managing supply chain risk in general is all about scaling and repeating. To uphold your policy and standards, be diligent and strict about annual security assessment and verification, and perform site inspections as needed depending on the severity of risks posed by a given vendor.

‘Trust But Verify’

From the earliest stages of the procurement process through onboarding, service provision, and offboarding, expectation-setting and verification should be woven through each vendor relationship. Even the most secure organizations can encounter challenges, and the best-run programs can break down—assume nothing, check everything.

Read more at How To Avoid a Third-Party Break in Your Supply Chain

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Supply Chain Complexity and Risk Management

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As part of the Supply Chain Management: Beyond the Horizon research project, faculty and staff from the Eli Broad College of Business at Michigan State University conducted in-depth interviews with a number of organizations to gain insights into the development and implementation of various supply chain strategies, practices, and processes.

The focus was intentionally on the future and on identifying what challenges are driving supply chain decisions in the current environment. The following report summarizes key findings from our investigation of supply chain complexity and risk management obtained during our visit to VF Corporation.

BACKGROUND

VF Corporation is a global branded apparel company that focuses on lifestyle clothing, footwear, and accessories. Since its inception in 1899 as a glove and mitten manufacturer, the firm has grown, diversified, and reinvented itself multiple times. Today, its 30 brands are organized into five coalitions or loose confederations that include outdoor and action sports, jeanswear, imagewear, sportswear, and contemporary brands. The firm has approximately 64,000 employees, sales of $12.4 billion (2015), and a consistent track record of annual sales and earnings growth. The firm is highly diversified across brands, products, distribution channels, and geographies, which provides a strong competitive advantage relative to single- brand competitors.

Because of its focus on lifestyle brands, the firm must remain focused on its consumers and their evolving behaviors and preferences. The firm has four key components in its business strategy:

  1. Lead in innovation (drive new products and new technologies to support evolving consumer needs and tastes)
  2. Connect with consumers (engage consumers in new and meaningful ways)
  3. Serve consumers directly (reach consumers across multiple channels, wherever and whenever they want)
  4. Expand geographically (take advantage of scale to reduce risk and drive competitive advantage)

Read more at Supply Chain Complexity and Risk Management

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