5 ways to use data & insights to protect the bottom line
From soaring inflation to natural disasters and more, global supply chains continue to struggle under a barrage of challenges that threaten operations and profitability.
Recently, a World Trade Organisation survey found 7 out of 10 economists say a global recession is at least somewhat likely, adding potential further instability.
The inability of global supply chains to weather these cascading macroeconomic and industry pressures is a top concern for procurement and supply chain leaders.
Interos’ Resilience Survey 2022 of 750 Chief Procurement Officers (CPOs) across multiple global industries revealed:
- 61% plan to make wholesale changes to their supply chain footprint in response to ongoing disruption
- 85% agree their organisation has too many suppliers concentrated in one area of the world
- 89% currently do not monitor supplier risks on a continuous basis and view this lack of transparency as a barrier to operational resilience.
- 74% plan on implementing supply chain visibility before Q2 2023
The data is clear. Our era of perpetual crisis is prompting major shifts in entrenched thinking. Old solutions are giving way to new realities. While the need for operational resilience has never been more urgent – the key question is how will organisations achieve it?
Ironically, many companies are still managing supplier risk the same way they have for decades – using backward-looking manual assessments and getting essential supplier data from static surveys, spreadsheets, and siloed reporting. This lack of real-time supply chain visibility and insights is the equivalent of fighting a wildfire with a glass of water.
The good news is that organisations can make better procurements decisions with actionable data and insights.
Here are five key areas to focus on:
1. Determine root causes of disruptions
Supply chain challenges are triggered by a multitude of risks – including ESG, cyber, geopolitical, restrictions, operational and financial risks.
Given the complexity of these events, it’s crucial to examine the root causes of disruption so businesses can eradicate their deep-seated triggers and prevent downstream impacts.
Forward-looking CPOs are using data-driven AI-powered risk insights to obtain a full view of their supplier networks to understand the ripple effects of supply breakdowns and where they originate.
2. Identify hidden supplier threats
More than half of procurement leaders traced disruptions to sub-tier suppliers. These hidden relationships are often the greatest source of risk because companies lack visibility into the operations of their suppliers’ suppliers.
Mapping supply chains to gain continuous intelligence into potential risks brought on by those suppliers is essential to understanding your true risk posture.
An example of this is the notorious child labour lawsuit brought by agricultural workers from Mali in 2005 against Nestlé with the Fair Labour Association (FLA) finding “multiple serious violations” of the company’s own supplier code.
Even though Nestlé was later cleared, it suffered sustained negative publicity globally, and became the first company to implement a system to address the potential hidden child labour risk in its cocoa supply chain.
3. Increase the depth and consistency of new supplier risk assessments
Using advanced analytics to pre-screen suppliers for risks during the discovery process saves time and lessens the likelihood that mitigating action will be required in the future.
To do this, procurement organisations are pursuing a more thorough vendor risk assessment – one generated not simply from one-dimensional business credit reports or self-reported data, but from thousands of public and proprietary data feeds that produce a more holistic risk profile, based on multiple tiers of the supply chain.
4. Broaden the view to enable faster identification and remediation of emerging risks
Organisations that are ahead of the curve and proactively assessing supply chain risk can quickly identify alternate suppliers and reduce disruptions.
Anticipating risks and proactively ensuring compliance with a growing list of global regulations such as the Uyghur Forced Labour Prevention Act (UFLPA), the Digital Operational Resilience Act (DORA) and the German Supply Chain Act (GCSA), dramatically reduces the likelihood that an enforcement action creates a material risk to your operations.
5. Leverage continuous real-time risk monitoring
The level of risk in a supply chain can change overnight with severe consequences to the bottom line.
Global powerhouses like Apple and Ford have reported substantial revenue impacts from supply chain issues.
Many other Fortune 500 companies experienced more than 25% drop in customer service levels because of supply chain problems.
Still, most companies review their suppliers once a year – if that. Only one-tenth of Chief Procurement Officers say they continuously monitor supplier risks.
Data and insights into supply chain visibility can alleviate much of the disruption we are currently experiencing.
Operations need to be flexible and resilient to changes in trade flows, new regulations, disease outbreaks, climate change, trade tensions and other geopolitical movements.
While nobody is immune to disruption, there are steps every organisation can take to prepare and mitigate the impact, especially with investments in the right technologies.
Together, technology and a holistic approach to supply chain risk can protect top-line revenue and ensure operational resilience in even the most adverse environments.
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