Supply Chain Risk Management: Current Industry Practices, Key Challenges and Requirements
Supply chain management and risk control is a process that combines elements of prevention, mitigation and recovery. Different models have been developed to achieve and deliver this process. However, all of those are based on the three basic steps of risk management: (1) identify sources of risk, (2) assess potential consequences of those risks, and (3) determine appropriate actions to mitigate those. The approach taken to complete each of those steps may vary depending on the requirements, available resources and complexity of the supply chain involved.
SGS’s global industry survey on "Supply Chain Risk Management: How vulnerable is your supply chain", completed by industries in 48 different countries, explored current supply chain management practices. It highlighted that, independent of the approach to be followed, gathering, processing, handling and communicating the right information is a prerequisite to effective supply chain risk management and a booster of supply chain resilience.
Supply chain resilience is defined as the ability of a global supply chain to reorganise and achieve continuous delivery of its core functions, despite the impact of external and/or internal pressures. Factors that can have a significant impact on supply chain resilience include energy price increases, environmental changes and major pandemics, amongst others. According to the results of our survey, product tampering and fraud was identified as the number one threat to supply chain resilience (55.1%) followed by supplier financial stability (40.9%), political and social unrest (37.3%) as well as sustainability (36.9%). Identifying risks and prioritising those according to potential impact, is a key approach towards improving supply chain resilience. The results of our survey indicated that conducting risk audits of key suppliers (68.3%) as well as creating a supplier risk register (42%) are industry’s top resilience improvement practices.
In a recently published industry consultation report (Campden BRI, 2015), the need for the development and implementation of the appropriate systems to assure supply chain integrity, and therefore supply chain resilience, throughout manufacturing, distribution and sale was listed amongst the key industry priorities. These would involve analytical, horizon scanning and intelligence gathering tools able to identify, assess and mitigate risks.
Our survey indicated that 48.4% of respondents do not currently implement a supply chain management tool, although the great majority of participants (64.9%) confirmed that their organisation sees a benefit in implanting such tool. At the same time, only 17.3% confirmed that their organisation currently uses a supply chain management tool that is able to support full supply chain visibility and transparency beyond Tier 1 suppliers. In 41.3% of cases, organisations focus supply chain investigations to Tier 1 suppliers and 42.2% of respondents indicated that their organisations currently rely on Tier 1 suppliers to manage their own supply chain. Overcoming supply chain risks is considered a visibility challenge that needs to be tackled by more transparent data communications and effective reporting capabilities enabled by sophisticated operational procedures and IT tools.
No process or tool, no matter how sophisticated this may be, can guarantee the safety and integrity of a supply chain as complicated as the food supply chain, however the development of better traceability systems throughout the supply chain, as well as attempts to simplify, harmonise and standardise industry specifications, standards and auditing approaches are significant steps towards that direction. Our industry survey has confirmed that effective communication and collaboration across the supply chain, end to end supply chain visibility, traceability and transparency as well as knowledge of current and emerging risks, are commonly considered to be the three top prerequisites to effective supply chain risk management and are “must have” requirements for the development of a resilience framework.
For more information, please contact:
Dr Evangelia Komitopoulou
Global Technical Manager – Food
SGS United Kingdom Ltd
Camberley, United Kingdom
t: +44 (0) 7824 08 9985
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