Supply chains are becoming more and more complex. As they reach across borders, supply chains grow subject to the socio-economic and political disruptions that can occur overseas. But supply chains don’t have to operate globally to be vulnerable — both domestic and global supply chains have distribution, manufacturing, people, ownership, regulatory, technology and transportation components.
Anything that can disrupt the flow of goods is a vulnerability to be managed. Your supply chain system needs to be able to handle accidents and external shocks as well. The more vulnerable your supply chain, the more likely you will see a loss of operating income, sales growth and share price.
Because of this, supply chain risk should be top-of-mind of C-level executives today who want to continue to grow their company, out-perform the competition and keep shareholders happy. With an increase of natural disasters, cybersecurity breaches, unpredictable socio-economic factors and fluctuating customer demands, businesses need to be prepared to handle almost anything, including the loss of:
- Supplier and customer base
- Production, distribution, warehousing and logistics facilities
- Transportation lanes or modes
- Intellectual property
With so much potential for devastating loss, businesses today need to be proactive, rather than reactive in their risk management priorities and practices. Risk can arise from anywhere, inside or outside the supply chain, foreseen or unforeseen. Risk management is the continual activity of detecting, measuring and evaluating real or potential risks in order to reduce or eliminate negative exposure. Unless the process is continuous, businesses will never be in front of the risks; they will always be in the reactive position, playing catch up, and dealing with the damage.
The best way to mitigate risk is to have end-to-end visibility across the entire supply chain. This includes visibility across all trading partners, suppliers, manufacturers, distributors, customers — from raw materials to end delivery. In fact, based on a recent research study, 94 percent of respondents believe that supply chain visibility platforms are a key driver for change in the supply chain.
When all supply chain participants are connected to a Business Network to conduct commerce, collaborate and communicate in real-time, businesses gain a centralized view of their end-to-end supply chain through which early warning signs of a disruption can be seen. If a supplier has lost a production facility due to a natural disaster, communication can be broadcast across the network seeking an alternative supplier or looking for reserve inventory. Or if a carrier fails to respond to a shipment request, this can be detected early, allowing transport operation managers the ability to resend the request and secure another carrier so customers will still receive their orders as requested.
The Business Network must be capable of capturing data and event information from disparate systems from all participants in real-time. It must capture information for your orders, shipments, invoices, inventory levels, payments, carrier bids, availability and status.
Supply chain visibility via a Business Network means that companies never have to wonder where their products are during transit. All trading partners within a connected business network have visibility to all activities involved in each specific transaction. Proactive notifications for missing business signals, such as the loss of a transportation mode or facility or the failure to respond to a request, can be seen by all connected to the network, allowing others to respond so a disruption is avoided.
With end-to-end visibility into potential supply chain disruptions, companies mitigate risk by:
- Uncovering long-term and short-term factors that may pose threats and risks to the success of the supply chain and the scenarios through which these threats, risks and vulnerabilities may evolve.
- Identifying and assessing the current risk environment, prioritizing it and then developing a risk mitigation strategy.
- Diversifying suppliers for additional access to equivalent materials. If something happens to one supplier, another supplier on the Business Network can fulfill the request for materials.
- Optimizing inventory buffers and safety stock levels to continue production.
- Jointly planning and collaborating with suppliers and customers to ensure supply chain risk plans are followed and create value for participants.
- Sharing forecast and demand information with trading partners to be more responsive to demand fluctuations.
- Performing “what-if” analysis to uncover vulnerabilities and developing strategies to defend against them.
- Routinely exercising the risk mitigation plan including routinely rotating across suppliers
End-to-end visibility across the supply chains of companies comes from using a Business Network that provides access to the right data in real-time, giving companies the ability to make fast, accurate decisions based on evidence that can be used not only to manage events, but to also circumvent disruptions on a daily basis that can be very costly to a company. Real-time, upstream views of data, as well as access to historical data and forecasts, are an important combination in using supply chain visibility to proactively manage events that can quickly interrupt the supply chain.
Gary Neights is Product Manager at Elemica.