Industry awareness regarding supply chain risk management continues to grow each day. In fact, 80 percent of companies worldwide see better protection of supply chains as a priority, according to the World Economic Forum’s “Risk Response Network” report, in collaboration with Accenture. But while the heightened educational level is both necessary and a great first step, it is not enough.
The use of risk management platforms, risk mitigation at just the first tier of one’s supply chain, business continuity planning (BCP) strategies and even maintaining inventory buffers—it is not enough to use just one of such a handful of processes to proactively protect and support the supply chain processes of today for any business.
We all observed what happened with the fire that broke out and killed 112 workers at the Bangladesh apparel factory—which manufactured items for Wal-Mart Stores Inc.—because of a lack of visibility in the retailer’s lower tier supply chain. Let’s also not forget the horsemeat scandal. The same lack of visibility that was obvious in the Bangladesh fire is also a similar issue in the continuing awareness regarding horsemeat that appeared in beef products sold to the consumer market, which already affected a number of countries such as the United Kingdom, Ireland and Britain.
Perhaps the most obvious factor to understand is that such incidents are not the first of their kind in the world. What must be addressed is the fact that no one is exempt from such supply chain disruptions. And businesses must not just react to such supply chain disruptions but instead adopt holistic, preventative measures to counteract the next potential disaster—especially as supply chain disruptions have the potential to destroy more than seven percent of a company’s shareholder value, according to the WEF report. As such, businesses must obtain constant, real-time visibility into the multi-tiers of their supply chain—from their suppliers to their suppliers’ suppliers and further.
“There are structural changes that need to be made,” confirmed Kevin O’Laughlin, Managing Partner, U.S. Supply Chain and Operations Advisory Services, KPMG. “There needs to be awareness and training about how to respond effectively. There’s got to be controls in place to enforce policies around dual sourcing of supply or other activities as well as a technology that provides visibility. Any one of those alone is not the whole answer. It’s a combination of those things.”
In the wake of natural disasters
“Over the years, with customers doing more single sourcing and outsourcing operations to tier suppliers, that really caused a lot of fragile supply chains,” said Jon Bovit, Chief Marketing Officer, Resilinc Corp. “A lot of the challenges are the risks in the sub-tier levels—those are of major concern. It’s not good to just put tools in place. We have to bake it into the fabric of standard operating procedure which means that it can’t add to the workload. It has to automatically identify things and get people working on it so they can automatically detect certain things and optimize the process.”
Superstorm Sandy, the 2004 Indian Ocean earthquake followed by the tsunami that hit Indonesia, India, Thailand and Sri Lanka, and even dating as far back as to Hurricane Katrina of 2005, which current residents of the Gulf Coast still see consequences of today as a result of it—such natural disasters fall into the “expected” realm of disruptions, i.e., natural disasters do occur all over the world and because of weather monitoring, can be prepared for. Despite that, some businesses in today’s supply chain may still claim that they cannot be accounted for because of the scope of their nature.