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Managing a supply chain in 2020 incurs a certain amount of risk by necessity, but planning ahead to strategically manage risks, respond to incidents, and deal with disruptions can put your business ahead of competitors.
In order to best address these supply chain risks, they can be categorized by implications, or by sources.
- Qualitative: addresses the reliability and accuracy of materials
- Quantitative: addresses the availability of material or overstocks
- Atomistic: impacts only constrained links within it
- Holistic: requires businesses to assess entire supply chains
Supply chain risks can also be categorized in the following segments:
- Global sourcing risk
- Foreign exchange risk
- Supplier criticality
- Supplier financial risk
By looking at each of these risk categories individually, businesses gain a deeper understanding of how to best prioritize their attention. Supply chain risk management trends for 2020, examined below, offer further insight and solutions to industrial businesses aiming to achieve a more transparent, risk-aware supply chain in the new year.
1. Plan for Global Shifts
As supply chains become increasingly complex due to the rise of Industry 4.0 and digital transformation, geopolitical risks further complicate matters for chief procurement officers (CPOs) and supply chain managers.
In a 2019 Deloitte survey, 34% of CPO respondents cited the risks associated with the looming “trade war” as a major concern for their supply chain; Overall, it was the fourth-highest risk concern going into the new year.
The ongoing tariff uncertainty surrounding trade with China has been a concern for supply chain managers for over a year now, but as the U.S. and China move toward a “Phase Two” deal at a future date still yet to be determined, CPOs are still worried about potential supply and pricing impacts in the coming months.
Additional factors like Brexit, unpredictable natural disasters like wildfires and hurricanes, international health crises, and other unanticipated events can have widespread implications throughout the global supply chain.
2. Utilize New Technology
Modern technology can make a big impact on supply chain risk management if used correctly. 2020 trends include artificial intelligence, the Internet of Things (IoT), and blockchain as helpful resources to supplement your supply chain management, but previously utilized technologies like ERP systems and machine learning, especially in warehouse settings, still play key roles.
Artificial intelligence helps companies analyze their data to improve supply chain operations and reduce errors and disruptions. IoT devices capture data with greater accuracy than their human counterparts, and blockchain allows businesses to record data in a tamper-proof, shareable medium. ERP systems coordinate efforts across departments and team members to keep production organized in a single platform, and warehouse management systems with machine learning capabilities use pattern-based predictions to improve routing, storage, and shipment processes.
As Industry 4.0 continues to spread, it’s time for your company to digitize operations. Accruing and analyzing the resulting data creates a roadmap for supply chain managers to follow as they develop their strategies and risk management approaches for 2020.
3. Identify Cyber Vulnerabilities
Though there are many threats to supply chains in 2020, one of the most serious is the growing importance of cybersecurity. Because of a supply chain’s multi-party ecosystem, numerous vendors and suppliers may have access to your company’s digital infrastructure; While this is helpful for improving communication and efficiency throughout the supply chain, it also exposes your industrial business by creating multiple access points into your systems that could be vulnerable to hacks.
Your technical team can implement top of the line protection to reduce the risks of cyber threats, but it’s up to the entire company to stay aware, limit vulnerabilities, and avoid potential breaks in the protective chain.
To address these concerns, continuously monitor your networks, keep track of which vendors have access to your systems and be sure to make adjustments as your supply chain shifts, carefully vet all outside systems before incorporating them into your operations, and, most of all, train your colleagues on how to stay vigilant against cyber threats.
4. Pick Your Battles with Suppliers
Arguments with suppliers can cause major disruptions to production. While disputes are bound to happen, minimizing risks by hiring effective communicators who can arrive at symbiotic compromises will go a long way toward your company’s bottom line as well as maintaining fruitful supplier relations.
It’s also important to pick your battles with suppliers; ultimately if there is a continued conflict with a supplier, it may be time to find a new one.
If you’re looking to source a new supplier, developing strategic partnerships is vital; when assessing potential suppliers, examine their quality standards, ethics, and whether any of their existing partnerships could indicate a conflict of interest. Before reaching out to new suppliers, Deloitte suggests first determining if your existing network can meet your needs in order to mitigate risk.
Image Credit: Freedomz / Shutterstock
