Supply Chain Risk Management Rising Up Global Corporate Agenda

Less than a year ago, risk management remained one of the hidden details of successful supply chain management. In a comprehensive analysis of risk management at the University of Tennessee: Global Supply Chain Institute 90 percent of supply chain executives did not quantify risk as a verifiable threat to their organizations. 66 percent of supply chain executives maintained legal compliance as it pertains to risk, but these respondents failed to do anything proactive to mitigate risk. Additionally, 100 percent of respondents considered insurance to be a primary means of mitigating risk; however, none of these respondents had a corresponding insurance policy. However, the attitude towards dealing with supply chain risk management appears to be changing directions. In late 2014, Transport Intelligence and Kewill conducted a survey to find out how supply chain leaders were dealing with risk management.

Risk Management

Asian Emerging Markets Impacting Global Supply Chain Risk Management

Within the Transport Intelligence survey, 45.3 percent of respondents had preferred ocean-based methods of transport on their agenda. This is a stark change from 31.4 percent in 2011’s survey and appears to show how the emerging Asian economies are impacting the global supply chain. As more global supply chain partners continue to look for the best balance of manufacturing and shipping methods to produce the highest return on investment, more companies have opted to follow the ocean-based, as opposed to air freight, path towards order fulfillment for consumers and businesses. Furthermore, more than 70 percent of respondents in the survey identified poor schedule compliance as a chief supply chain risk to address.

An inability to ensure modes of transportation have the specified amount of product, depart, and arrive on schedule leads to problems to the end user, or consumer. Unfortunately, the increasing impact of digital applications, such as detailed order tracking of shipments, poses a significant threat to the global supply chain. In fact, 18.1 percent of respondents within the survey found consumers were making such detailed tracking and tracing demands. Failing to receive a shipment as specified may lead to the canceling of future orders, or reduction in overall ordering patterns. In close proximity, the issue of supply chain visibility has risen to be the second leading risk concern for supply chain service providers.

Visibility Within the Global Supply Chain

37 percent of respondents identified concerns about visibility for supply chain risk management. Failing to maintain stringent levels of visibility has repercussions for the supply chain entity, consumers, and collaborative partners of the respective supply chain. Governmental oversight authorities may impose stiff penalties and fines for failure to disclose appropriate information; however, the main concern with visibility is not a legal compliance issue. Instead, it refers to the overall visibility to subsequent supply chain partners and consumers. The power of the Internet and social media have led to a huge reputation conversation about which supply chain partners are engaging in transparent business practices.

In response to the surge in demand for increased visibility, 27.9 percent of respondents plan to implement additional measures to guarantee visibility across the supply chain. Currently, only 16.9 percent of current supply chain leaders can claim true end-to-end visibility. 53.5 percent of respondents plan to install extensive IT networks, technologies, and systems to increase visibility as well. This represents a massive investment towards safeguarding the future of the supply chain. With so much information to become readily available with the implementation of such IT measures, it’s easy to assume most entities would appoint a Chief Risk Officer to mitigate additional risks. However, the survey revealed a shocking truth: less than three percent of respondents plan to appoint, or create, a Chief Risk Officer to oversee this growing concern. Why then, should consumers trust supply chain service providers in the first place?

Public Perception of Supply Chains

The future of supply chain visibility does not immediately look bright when considering the lack of Chief Risk Officers in most entities; however, consumers must understand how automation is playing into the equation. Many different supply chain processes produce a near-unlimited amount of data, and analytics are providing the resource necessary for the recommendations based on the gathered data. As a result, supply chain service providers may not have to divert resources from other processes to identify a sole person as the Chief Risk Officer. Instead, a person may be charged with ensuring visibility across the supply chain, and third-party logistics providers (3PLs) often have entire teams of individuals to mitigate such risks. The public perception, and therefore, the public trust depend upon the successful implementation of increased visibility strategies.

From emerging markets in Asia to social media’s impact on supply chains, risk management is no longer thought of as a title. It is an all-encompassing aspect of successful supply chain management, and the Transport Intelligence survey shows how strongly risk management is affecting the global supply chain. Although risk management requires routine monitoring, analysis, and mitigation of potential threats, an outside party, such as Flash Global, provides the enticement for successful supply chain risk management, especially since any potential conflicts of interest, such as potentially corrupt internal visibilities, are dramatically lessened, if not eradicated entirely.