As board rooms and C-suite executives become more adequately well-versed on the strategic role supply chain management plays in business success, supply chain risk mitigation is rising to the top of corporate priority lists.
But with so many risks seemingly outside of executives’ control — like trade wars and natural disasters — understanding how to plan for these scenarios and mitigate the threats they pose to the bottom line can be confounding.
In an effort to support corporates’ initiatives in risk mitigation, the supply chain analytics arena recently went through a bit of reshuffling with the acquisition of industry player Riskpulse by Columbia Capital, Greenspring Associates and DHL, which are combining Riskpulse with industry peer Resilience360 under the management of holding company Rising Tide Digital.
Speaking with PYMNTS, Rising Tide Digital CEO David Shillingford and Riskpulse CEO Simon Woods explored the current state of supply chain risk exposures at a time where geopolitical disruption, natural disasters and cyberattacks continue to capture headlines. In response to such external factors, they said, supply chain managers and upper-level executives are embracing a new, more sophisticated risk analytics strategy.
“This is a new world for many companies that have either worked on the basis of anecdotal information, or on information that was unstructured, from websites, for example,” said Woods. “They can now work on systemic analysis on a predictive basis.”
Analytics Tackles External Threats
Woods offered an example of this elevated approach to risk analysis. While analytics technology has evolved to be able to incorporate weather patterns and forecasts, for instance, taking this strategy to the next level means placing that weather forecast in the context of operational data.
For instance, analytics technology today is now capable of not only assessing the potential impact a snow storm in Chicago would have on delivery times, but can also connect supply chain managers to actionable insights about how one carrier is more likely to successfully complete a delivery during that snowstorm than another service provider.
Woods also highlighted the importance for risk analytics technologies to enable a dynamic approach to planning. Traditionally, he said, the need for temperature-controlled goods may mean a company has historically turned on and off refrigeration on a certain date of the year. But with unexpected cold snaps and heat spells, businesses must remain flexible to anticipate those fluctuations and act accordingly.
These scenarios have significant effects on corporate spend, he said, with an elevated risk analytics strategy now a crucial part of reinforcing a company’s overall bottom line. And predictive analytics is playing a growing role in analyzing these risks and their likely financial impact, although as Shillingford noted, challenges remain in applying analytics technology to threats like trade wars and hurricanes that are not easily quantifiable.
“I don’t think any of us are saying it’s possible to assign values to all future risks,” he said. “Some are easier to assign value to than others. But the journey we’re on is to get to that point.”
Internal Risks Abound, Too
Weather-related risks are among the largest facing supply chains today, according to Shillingford, who also pointed to geopolitical risks like trade disputes and cyberattacks as other key focuses of the industry today — all of which must be analyzed and addressed in the context of other factors at play.
But threats from within the supply chain are growing, too, including the risk of late payments, suppliers going out of business, or a cyberattack that hits one player down the supply chain but proliferates its way up.
“It’s important that companies look further upstream in their supply chains for an event that might not directly impact them, but the knock-on impact can be very significant,” explained Shillingford.
Businesses can be caught off-guard by events that occur at their Tier-2 and Tier-3 suppliers, or even further down the supply chain, that ultimately spill into their own operations.
Those impacts can range from lost funds to damaged reputations, and like the risks that cause them, these effects aren’t always easily quantifiable. But as analytics technologies continue to evolve, the ability for corporates and their service providers to prepare for scenarios and wield that data to optimize spend will grow.
“Predictive analytics are a lot more than just taking data and creating clever algorithms,” noted Woods. “You need some real intimacy with a company’s operational framework.”
As analytics technologies are applied in the broader context of that operational framework, the technology will become better equipped to offer more accurate actionable insights for corporates. According to Shillingford, this progression of analytics technology is what places risk analysis deeper within organizations’ decision-making processes, a trend that will continue to grow.
“We’re seeing a lot more interest in supply chain risk at the board level,” he said, “and part of that has to do with the operational impact that disruption and delay has on supply chains and reputation.”
