Six steps to building a more responsible, resilient supply chain

Part II in a series on data science and strategy

In the second of a series of articles focusing on the increasing importance of analytics in business, our President, Sondra Scott, delivers a real world approach to the assessment and management of risk in global supply chains.

More often than not, creating a safe supply chain is thought of as being an expensive endeavor. But resilient supply chains and more sustainable procurement practices can help bolster the bottom line. Companies that really understand their supply chains will come out ahead in the long term. They incur fewer costs in reactive post-risk actions and they generate more revenue by optimising their procurement processes and enforcing positive perceptions of their brand with their consumers.

The unfortunate truth, though, is that most organisations only have a limited amount of resources available to identify and monitor the kaleidoscope of risks that exist in their global supply chains. This is where analytics becomes so important. By using quality risk analytics, we can quickly map and high-grade our operations and suppliers for risks, which enables us to focus spend on the areas that need the most attention. We can use analytics to not only identify where our risks sit today, but to anticipate where risks will emerge in the future.
So, how do you make the most of the range of analytics and tools available to you? Here’s my quick guide on the six steps to success.

Step 1: Think holistically

First and foremost, we advise our clients to think holistically. Look at risks as interconnected, not only along the supply chain but across your entire business. For instance, civil unrest doesn’t just happen; the drivers of such events can include anything from government corruption, to drought, to egregious breaches of human rights. Getting the full picture by tracking a wide spectrum of risks is imperative in understanding your potential vulnerabilities and identifying opportunities for your business.

Step 2: Create a common language of risk

You need to create a common language of risk and manage one central source of data rather than lots of disparate disconnected datasets. Using one source of data will enable you to draw on a consistent framework where everything is measured in the same way. This makes complex issues easily understandable across the whole business – up to the most senior level.

Step 3: Centralise your risk monitoring

This will save you time, resources and confusion. There are lots of specialised tools in the market which help you monitor your supply chain for different risk workflows. That’s great, but, put a wrapper around them and keep your data consistent within that framework. This means hosting your own facility data, your supplier data, plus all your third-party inherent risk data in one place.

Step 4: Remember the world doesn't stand still

Life would be a lot simpler if risks were static. However, when your supply chain stretches across 50 different countries your suppliers are subject to a dynamic environment where the picture on the ground is always changing. Whether it’s erratic policy making, protests over labour rights, government instability or an upsurge in security risks, analytics can help you become nimble. By regularly monitoring these issues, you will know which of your suppliers are most exposed and you can adapt your strategy accordingly.

Step 5: Be targeted

Once you’ve identified the risks in your supply chain, it’s important to be both sensible and cutting edge in developing your mitigation strategies. ‘Sensible’ means implementing a strategy that is tailored to the specific risks in your supply chain. It should be a hammer-to-nail solution that is both appropriate and cost effective. ‘Cutting edge’ in that you should constantly be innovating both internally and jointly with your suppliers who are on the ground and likely have quality input into how to reduce these risks. Be wary of one-size-fits-all solutions.

Step 6: Communicate what you're doing

Don’t overlook the fact that you can distinguish your brand by your risk avoidance actions. Consumers and investors alike want to know that companies are responsible to the environment and the communities in which they operate. Properly communicating what you are doing to tackle these risks head-on can be good for your brand and help create opportunities for top-line expansion. Analytics are a perfect tool for illustrating improvements in your performance.

Don’t get left behind

Using analytics to improve sourcing or mitigate risk in the supply chain is not new. But, advances in data science techniques mean the ground is moving fast and those who move quickest will be best positioned to take advantage of their benefits. Picking the right source of risk analytics is crucial though. It will make your life easier and ultimately change the way you do business.

Sondra Scott

President, Verisk Maplecroft