Six Steps to Building a More Responsible, More Resilient Supply Chain
By Sondra Scott
More often than not, creating a safe supply chain is considered an expensive endeavor. But resilient supply chains and more sustainable procurement practices can help bolster the bottom line. Companies that really understand their supply chains will come out ahead in the long term. They incur fewer costs in reactive post-risk actions, and they generate more revenue by optimizing their procurement processes and enforcing positive perceptions of their brand with their consumers.
The unfortunate truth, though, is that most organizations have only a limited amount of resources available to identify and monitor the kaleidoscope of risks that exist in their global supply chains. This is where analytics become so important. By using quality risk analytics, we can quickly map and high-grade our operations and suppliers for risks, which enables us to focus spend on the areas that need the most attention. We can use analytics not only to identify where our risks reside today but to anticipate where risks will emerge in the future.
So, how do you make the most of the range of analytics and tools available? Here’s my quick guide on the six steps to success.
Step 1: Think holistically
First and foremost, we advise our clients to 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. The drivers of such events can include anything from government 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 common language of risk
You need to create a common language of risk and manage one central source of data rather than lots of disparate, disconnected data sets. Using one source of data will enable you to draw on a consistent 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, plus 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. However, 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 erratic policy making, protests over labor rights, government instability, or an upsurge in security risks, 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; “cutting-edge” in 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.
Don’t get left behind
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.
Sondra Scott is president of Verisk Maplecroft, a Verisk (Nasdaq:VRSK) business.