Supply chains are facing a “make or break year” but there are ways to improve resilience, according to standards body the BSI.
The BSI’s Supply Chain Risk Insights Report 2021 said global supply were going to “continue to be massively disrupted way into 2022 and it may well get worse before it gets better”.
Chief executive Susan Taylor Martin said: “It’s clear that the importance of supply chains will only increase as we head into 2022, and the steps organisations take now will ultimately determine their success or failure.”
Jim Yarbrough BSI’s global intelligence program manager, told Supply Management the coronavirus pandemic had brought heightened attention to supply chains, which increased pressure on them to be sustainable, ethical, and resilient.
“There's a lot more pressure right now because of this awareness and this understanding of the supply chain. It used to be that we had to do a lot of education when we were meeting with organisations for the first time, but now that hurdle has been cleared,” he said.
He warned if companies did not take steps to future-proof supply chains they risked product delays, due to shortages and global freight issues, and these factors could pose a reputational risk.
“Everybody understands the importance and the magnitude of supply chain now and those organisations that fall behind or fail to address those issues run a higher degree of reputational risk than they ever have.”
Yarborough stressed the effort to secure supply chains is “very much worth it.”
He said: “If you're looking at the cost and the time, and you're intimidated by that, I've never seen this effort not pay off for organisations. I've never seen it be wasted time or wasted money.
“I'm a firm believer that your supply chain can help save the world, it's really possible through supply chain management to lower emissions to lower the climate impact of your business to ensure that your goods are produced in an ethical way, and then all of the people within the supply chain are treated in a really fair and humane way.”
This is how organisations should increase resilience:
The report highlighted the importance of transparency within supply chains. However, while conversations around transparency tend to focus on increasing visibility within supply chains themselves, the report said transparency needs to begin before this.
Paul Raw, BSI senior consultant, supply chain security, said: “We talk to a lot of organisations that don’t have a depth of insight into who their business partners are. There’s a common saying that you inherit the risks of your business partners. If you don’t understand your business partners, and you don’t understand their risk, you don’t understand your own exposure to it.
“So, you’ve got to start by knowing who your business partners are and identifying their areas of strength and weakness. If you think about high profile shortages in the last twelve months – semiconductors, masks and PPE, for example – it’s a fact that there’s a real reliance on a fairly small number of critical suppliers.”
Chris Tomas, BSI lead intelligence analyst, supply chain services and solutions, likened not knowing your supplier and supply chain to “being in a darkened room without a key”.
2. Focusing on ESG factors
Yarborough made it clear that increased focus on supply chains throughout the pandemic has meant consumers are demanding more from companies. Without placing ESG factors at the heart of businesses, they risk losing customers.
Yarbrough said supply chain and procurement teams were best placed to ensure ESG factors get enacted within businesses.
He told SM: “There are an awful lot of statements being made at CEO level of what companies' climate commitments are or what companies' emissions goals are going to be and where they're going to be in 10 years' time. Those statements are rarely defined to a degree that you can see pragmatically how that's going to take place within the supply chain.
“If your organisation is deemed associated with bad actors in the supply chain, or that there's bad activity within the supply chain, large swathes of the consumer market will abandon brands, or they’ll very quickly pivot to another brand.”
3. Understanding 'pain points'
“You need to understand the dynamics of the supply chain if you want to identify where the pain points are and put robust control measures in plan,” the report said.
The report stressed pain points are both geographical and sector oriented.
By understanding the circumstances in key regions in your supply chains, or by understanding factors affecting different industries, businesses can better understand the risks of disruption, the cause and effect, and prepare and mitigate as much as possible.
Christopher Tomas, lead intelligence analyst at BSI said: “Continuing to follow the risk assessment process is a key factor in how well organisations remain resilient to these ever-changing risks in both supply chains and the world in general.
“It is up to the supply chain professionals, whether from a security, business continuity or sustainability perspective, to ensure that not only are they staying up to date on the current trends in risks, but also to apply this knowledge to the supply chain by ensuring that those pain points are identified in advance. This can be accomplished through the supplier assessment process, which measures how any given supplier is adhering to organisational standards.”
4. Understanding how risks interact
The report said businesses need to understand how supply chain disruptions can interact with each other, and understand how taking preemptive action to tackle supply chain issues can prevent complications arising from disruptions.
“An overarching threat to supply chains is the risk that individual considerations such as business continuity, sustainability, corporate social responsibility and security are not addressed comprehensively, and that organisations fail to acknowledge that they are interrelated. Business continuity threats can lead to security threats and vice versa,” the report said.
Convergence can be addressed by companies increasing their collaboration, ensuring that all parts of an organisation and their partners understand the integrated threats to a supply chain and that teams work together to address them.
5. Identifying emerging opportunities
The report highlighted how the changing US political landscape and Brexit have triggered a massive change in global trade agreements. “This continues to reveal an ever-evolving global economic picture,” the report said, and presents new opportunities for supply chains.
It recommended businesses stay aware of global dynamics and constantly reassess how these factors may affect their business.
“It’s essential that organisations have a clear insight into these dynamics – for example, tariffs on imports from non-US companies had an impact on many organisations. Suddenly, the whole landscape shifts – what was a good quality product at a good price starts to look very different, and, on top of that, the tariff is being passed onto the US consumer.”
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