COVID-19 has brought the resilience of supply chains into stark reality. The disruption of production sites and logistics mean purchasing departments across multiple sectors have felt the full impact. While managing the multiple challenges brought on by the pandemic, such as maintaining the continuity of goods, managing inventory, and renegotiating contracts, is obviously front of mind, this could also be the time to look at strategic sourcing plans to bolster resilience.
This is where data analytics become so important. By blending internally held supplier data on volume, location, and spend with quality risk data, you can quickly map and high-grade key facilities to identify vulnerabilities. This will give you critical insight into the suppliers or commodities that could be exposed to similar major events, such as natural hazards, incidents of civil unrest or even armed conflict, or pose reputational issues due to poorly enforced labor standards.
Companies that take this time to really understand their supply chains will likely come out ahead once we emerge on the other side of the current COVID-19 crisis.
So, what can purchasing departments do now to help with a smooth recovery in the aftermath of the current crisis and secure supply chains over the long-term against similar crises when they emerge? We’ve pulled together a quick guide.
Step 1: Think holistically
First and foremost, think holistically. Look at risks as interconnected—not only along the supply chain but across your entire enterprise. For instance, civil unrest doesn’t just happen. In the aftermath of the pandemic, resentments against some governments could build, sparking large-scale protests in some areas. But the drivers of such events can include anything from corruption, to drought, to egregious breaches of human rights. Getting the full picture by tracking a wide spectrum of risks is imperative in understanding your potential vulnerabilities and identifying opportunities for your business.
Step 2: Create a consistent view of risk
You need to create a consistent view of risk and manage sources of data centrally, rather than rely on lots of disparate, disconnected data sets. Using consistent sources of data will enable you to draw on a common framework where everything is measured in the same way. This makes complex issues easily understandable across the whole business—up to the most senior level.
Step 3: Centralize your risk monitoring
Centralizing will save you time, resources, and confusion. There are lots of specialized tools in the market that help you monitor your supply chain for different risk workflows. That’s great, but put a wrapper around them and keep your data consistent within that framework. This means hosting your own facility data, your supplier data, and all your third-party inherent risk data in one place.
Step 4: Remember the world doesn’t stand still
Life would be a lot simpler if risks were static, but they’re not, and COVID-19 is a prime example. When your supply chain stretches across 50 different countries, your suppliers are subject to a dynamic environment where the picture on the ground is always changing. Whether it’s the capacity of a country’s healthcare system to deal with a pandemic, erratic policy making, protests over labor rights, government instability, or an upsurge in security risks, risk analytics can help you become nimble. By regularly monitoring these issues, you’ll know which of your suppliers are most exposed, and you can adapt your strategy accordingly.
Step 5: Be targeted
Once you’ve identified the risks in your supply chain, it’s important to be both sensible and cutting-edge in developing your mitigation strategies. Sensible means implementing a strategy tailored to the specific risks in your supply chain. It should be a hammer-to-nail solution that’s both appropriate and cost-effective. Being cutting-edge means that you should constantly be innovating both internally and jointly with your suppliers, who are on the ground and likely have quality input into how to reduce the risks. Be wary of one-size-fits-all solutions.
Step 6: Communicate what you’re doing
Don’t overlook the fact that you can distinguish your brand by your risk-avoidance actions. Consumers and investors alike want to know that companies are responsible to the environment and the communities in which they operate. Properly communicating what you’re doing to tackle these risks head-on can be good for your brand and help create opportunities for top-line expansion. Analytics are a perfect tool for illustrating improvements in your performance.
Preparing for the worst will make for better times
Companies that take this time to really understand their supply chains will likely come out ahead once we emerge on the other side of the current COVID-19 crisis. Using analytics to improve sourcing or mitigate risk in the supply chain is not new. But advances in data science techniques mean the ground is moving fast, and those who move quickest will be best positioned to take advantage of their benefits. Picking the right source of risk analytics is crucial, though. It will make your life easier and ultimately change the way you do business.