How Digital Supply Chains Help Companies to Mitigate Supplier Risk
In every annual report of global Fortune 500 companies, you will read through a section dedicated to monitoring, managing and mitigating supply chain supplier risk. It’s nearly impossible to navigate a supply chain career without experiencing a supplier disruption at some point that significantly impacts the bottom line.
Because of its potentially catastrophic consequences, most organizations go to great lengths to develop and adopt supplier risk strategies. Mainly, traditional supplier risk management strategies involve surveys that are distributed by brand owners to their Tier-1 suppliers. These surveys include a host of questions related to compliance guidelines that the supplier agrees to abide by (e.g., labor laws, minimum capacity commitments, service level agreements, confidentiality, etc.). Brand owners also conduct on-site inspections of supplier facilities to ensure that the suppliers’ actions actually conform to their survey responses.
In truth, they are less about mitigating supplier disruptions and curtailing their downstream impacts, and more about backward-looking compliance and checking boxes to protect company leadership. Unfortunately, such traditional approaches are falling short in several ways:
Risk mitigation at best should be about prevention, or at worst, rapid response. For organizations to truly mitigate supplier risk, they need to monitor dynamic events and behaviors and predict when something bad is going to happen. This is what digital supply chain solutions do…
This kind of understanding of supplier behavior, visibility and predictability is true risk mitigation. It enables supply chain professionals to ‘get left’ of risks with enough time to do something about it. As the starting point, live and predictive insights of risks and performance related to inbound flow is the first signal to enable greater connectivity, communication and collaboration between vendors and buyers.