As supply chains have become more and more global and complex over recent decades, so too have the challenges and risks threatening their safe and efficient operation. It’s not so much that a greater number of risks exist in today’s world, or that any of the risks are more severe than in the past, though, but that the supply chains themselves have evolved in such a way that disruptions are pushed further through the system. The adoption of lean techniques and just-in-time methods over the last few decades of had a number of benefits for manufacturers and retailers – including the ability to operate with vastly reduced inventories and to lower costs in an era when interest rates generally made holding stock an expensive proposition – but operating this way has cut the margin for error in supply chains, meaning a range of natural and man-made disasters can have widespread consequences for production schedules and customer service levels.
When these risks are coupled with the everyday problems faced by supply chain managers – cargo crime, corruption and strikes, amongst others – creating robust and resilient supply chains is becoming an ever more pressing challenge. We at the Ti blog recently brought you an interview with Ti’s CEO John Manners-Bell on the subject of supply chain risk in which he characterised the challenge as not about preparing the supply chain for known threats, but about “making it resilient against all risks – what’s called risk–agnostic. This requires a great deal of scenario planning; putting processes in place, implementing the technology to sense and respond to events as they happen. It has to go to the very core of a company’s supply chain strategy.”
Creating a risk-agnostic supply chain is a global challenge, and the emergence of new logistics markets is introducing a number of additional variables to the equation. In the same interview, John pointed out a current risk associated with these emerging markets and one which is also beginning to reveal different elements of risk for future supply chains; “Modern supply chains reach deep into many emerging markets where social and environmental practices are less sophisticated and under much less scrutiny than in the developed world. Multinational enterprises are starting to realise that there is a huge reputational risk to their companies if they are not seen to be treating their employees, or more often their suppliers’ employees, in a fair and equitable fashion. Likewise they understand that their suppliers must behave in a sustainable way to the environment, otherwise the implications of bad press will rebound on their brand. Consequently we mustn’t just think of supply chain risk in terms of the disruption to the flow of products; there are much wider issues and costs at stake.” Little more than a year on from the disaster at Rana Plaza it can be seen that including societal and ethical elements, as well as environmental concerns, in the supply chain will be necessary to mitigate such risks.
As you might now be able to tell, there’s been a lot of focus on supply chain risk here at Ti’s Global Research Centre lately. The subject was also covered at the recent Emerging Markets Logistics conference Ti held in Dubai during a session that saw the official launch of John’s new book “Supply Chain Risk: Understanding Emerging Threats to Global Supply Chains”. The book examines the evolving challenges which manufacturers, retailers and logistics companies face in achieving low inventory operations whilst maintaining remote sourcing strategies.
And that’s not all; as our work on the subject here at Ti continues, we’d like to know your thoughts and opinions too. That’s why we’re currently running a survey on the subject, which you can complete by following this link. The insights we gain from such surveys are hard to overstate, and we appreciate everyone who takes the time to complete them, and that’s one of the reasons why everyone who completes this survey will be offered a free summary report of the findings.
Supply chain risk is one of a number of subjects Ti regularly covers as part of its free Logistics Briefing service. Subscribers of the service will receive weekly coverage of developments in the global logistics industry as well as news from the Americas and Asia Pacific. The free service, which you can sign up to by clicking here, also includes coverage of industry mergers & acquisitions and executive moves as well as regular special features.