In efforts to squeeze costs from their supply chains, companies are embracing global sourcing and working with emerging markets where labour is plentiful and cheap. However, as operations become multinational, companies face new supply chain risks.
The problem with supply chain risk management
In the sixth annual Supply Chain Resilience survey, the Business Continuity Institute and Chartered Institute of Purchasing and Supply discovered some worrying patterns among businesses last year:
- 78.6% of respondents did not have full visibility of their supply chains
- 76% experienced at least one incident that caused supply chain disruption
- 13.2% lost in excess of €1 million (£839,633) due to a one-off disruption
- 58.5% also suffer a loss of productivity, and 44.7% experience a loss of revenue
- Despite all this, 13% do not analyse supply chain disruptions to identify the source
These figures show a worrying trend. A large majority of surveyed companies lack full visibility over their supply chain, despite an even higher incidence of supply chain disruption. Even in the face of significant financial and productive losses, over 10% of organisations fail to look for the cause of the problem, let alone address it.
Another interesting statistic is that 44.4% of reported disruptions originated beyond primary suppliers. The more complex any business operations become, the more potential supply chain risks emerge. When an organisation lacks transparency over its primary, secondary and tertiary suppliers, it becomes very difficult to trace back through the supply chain and locate the root of a problem.
Risk is everywhere in global supply chains
Political instability, legal disputes and natural disasters can all impact upon an organisation’s activities, particularly if they operate globally.
For instance, the M/V Maersk Tigris container ship was recently detained on a fixed trading route through the Strait of Hormuz due to legal disputes between a private Iranian firm and the Danish charter company. The vessel and crew members have since been released, but the incident serves as a reminder that a single incident can potentially bring supply chains to a standstill.
Floods, volcanoes and forest fires can also send whole regions into disarray, cutting off electricity, transport and basic supplies. The massive earthquake that recently ravaged Nepal has also caused injuries and infrastructural damage across India, Bangladesh and Pakistan. This region represents a manufacturing powerhouse, and many global supply chains could see procurement and sourcing affected by this natural disaster.
What your organisation can do
In order to prepare for any eventuality, companies need to consider supply chain risk management.
“It is no longer acceptable to have blinders on and hope that nothing bad happens,” Jamie Crystal, Executive Vice President for insurance adviser Crystal & Co., recently explained to the Wall Street Journal.
When companies are unaware of their secondary and tertiary suppliers in complex global operations, they effectively give up control of their business activities. Organisations need to find a way to track and monitor each and every link in the supply chain to gain a new level of transparency.
Segura’s supply chain software creates a real-time audit trail which enables our customers to achieve this transparency. By creating a pre-approved network of suppliers, companies can manage their supply chain through Segura, with all of their transactions passing through our platform. As a result, companies can immediately see if any unauthorised or unreliable parties enter the supply chain, and can take action to protect themselves.
Originally Published 14/05/2015