6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

One in four businesses exceed ‎US$1 million in losses, but almost half of survey respondents in Asia Pacific did not insure their losses.

Zurich Insurance has revealed the key Asia Pacific findings of the Business Continuity Institute (BCI) “Supply Chain Resilience Report 2016”. Despite six out of ten organisations experiencing at least one supply chain disruption during the past year, with one in four exceeding ‎US$1 million in losses, the report found that almost half of survey respondents in Asia Pacific did not insure their losses.

Partnering with BCI for the eighth year, the annual report is regarded as one of the most authoritative benchmark reports in this business area. The key findings for Asia Pacific (APAC) this year are:

  1. IT/Telecom outages was named as the number one cause of supply chain disruption
  2. One in four organisations experienced cumulative losses of over ‎US$1 million
  3. 46% of organisations do not insure their losses, meaning they bore the full brunt of the cost
  4. Only 30% of disruptions occur with an immediate supplier
  5. 48% responded that top management have made commitments to supply chain resilience

Read more 6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

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Why Supply Chain Risk Management is Key to Supplier Management

While brand damage can be quite costly to the businesses whose sales rely strongly on the customer loyalty they generate from their brand strength, cost volatility and supply disruption is very costly to all manufacturers. In fact, in the latest 2015 study by the Business Continuity Institute, supply chain disruption is double in priority relative to other enterprise disruptions and over three-fourths of respondents cited that they had at least one recent (significant) disruption. The same percentage didn’t have full visibility of their supply chains.

While category management can address and even reduce supply chain risk by ensuring a chosen strategy has the right level of resiliency, prevention and agility, it cannot prevent risk or do much to eliminate the source of risk once something has happened. That can only be done by each party in the supply chain doing everything they can to eliminate the risk. In particular, a supplier needs to do all they can to minimize the risk on their end.

However, not all suppliers are as advanced in supply chain management, and in particular, risk management as the buying organization. That’s why good supplier management combined with SCRM is key. Good risk management is a combination of risk prevention and risk mitigation when a risk is detected. Risk prevention involves selecting suppliers, products and services that are low risk and risk mitigation involves taking action as soon as an indicator is detected.

A supplier is not always good at mitigating or even detecting risk in its supply chain, or may overlook an obvious sign that an observant buyer would not, which is why proper supplier management is key. This begins even when qualifying suppliers. Including risk criteria related to the supplier and supplier location gives a good indication of a supplier’s the risk level. Besides the supplier qualification criteria, supply location-related risks provide an overview on potential threats like natural disasters, political situation, sanctions or economic risk. This gives buyers the chance to take preventive actions.

Read more at Why Supply Chain Risk Management is Key to Supplier Management

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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.

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

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Poor Visibility Puts a Majority of Organizations at Risk for Supply Chain Disruption

The majority of companies that experienced a supply chain disruption in the last year cited either a tier 1 or tier 2 supplier as the predominant source of the disruption, according to 2015 Supply Chain Resilience Report from the Business Continuity Institute and Zurich Insurance. Half of all respondents in the report cited a tier 1 supplier, the immediate or direct supplier, as the major source of the supply chain disruption and an additional 21% cited their tier 2 supplier, the supplier of the OEM’s tier 1 supplier.

The report also showed the majority (72%) of organizations lack full visibility into their supply chains. What is troublesome, too, is that nearly 1 in 10 (9%) of the more than 500 companies surveyed for the report do not fully know who their key suppliers are. This can no doubt make supply chain risk management even more difficult for firms that lack proper oversight on who exactly their suppliers are.

According to Thomas Kase, vice president of research at Spend Matters and an expert on supply chain risk, sometimes companies lack quality visibility and have a fragmented picture of their suppliers and what they deliver.
“The end result is a foggy mess,” Thomas said.

Read more at Poor Visibility Puts a Majority of Organizations at Risk for Supply Chain Disruption

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4 steps to better manage global supply chain risks

To better manage global supply-chain risks and address any warning signs of fraud, abuse, and waste, Deloitte suggested companies take these four steps:

  • Know your supplier to identify and prioritise risk.

Gather information internally and externally to identify potential risks involving suppliers and business partners, including what relationships to government entities they have, how they are compensated, what the scope of the relationship is, and what compliance programmes they have. Run a background check on suppliers to detect potential risk indicators.

  • Map the volume of products flowing around the world.

Use mapping software to visualise product flows as lines whose thickness represent corresponding volumes. This type of map can reveal vulnerabilities, such as large volumes of supplies flowing into high-risk regions.

  • Identify, investigate, and confirm anomalies.

Review transactions for accuracy, authorisation, existence, and approval. Look for anomalies by, for example, assessing the responsiveness of the supplier, checking the information of an invoiced item and the rate charged, looking for any notations providing information about a transaction. Get documentation to vet gathered transaction data.

  • Track, manage, and learn from the information.

Establish a supplier database that contains compliance and risk data, such as audit history, total spend, and geographic location. Sort suppliers into risk tiers to help prioritise, manage, and enact corrective action plans.

Read more at 4 steps to better manage global supply chain risks 

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US Supply Chains More Vulnerable to Climate Risks

US Supply Chains More Vulnerable to Climate Risks

Lack of preparation currently leaves supply chains in Brazil, China, India and the US more vulnerable to climate risks than those in Europe and Japan, according to a report by CDP and Accenture.

Supply chain sustainability revealed: a country comparison also finds suppliers in China and India deliver the greatest financial return on investment to reduce their greenhouse gas emissions and demonstrate the strongest appetite for collaboration across the value chain.

The research is based on data collected from 3,396 companies on behalf of 66 multinational purchasers that work with CDP to manage the environmental impacts of their supply chains. They account for $1.3 trillion in procurement spend, and include organizations such as Nissan and Unilever.

Analysis and scoring of suppliers’ climate change mitigation strategies, carbon emissions reporting, target setting, emission reduction initiatives, climate risk procedures, uptake of low-carbon energy, and water risk assessment efforts, as disclosed by suppliers to CDP, were used to create a sustainability risk/response matrix that shows how well prepared suppliers across 11 major economies are to mitigate and manage environmental risk in their supply chains.

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