Cyber security, supplier viability, natural disasters, intellectual property theft and other numerous risks are taking jabs at today’s global supply chains and leaving organizations scrambling to develop contingency plans. In many cases, these events necessitate a reactive approach to the problem – be it a key supplier that went out of business overnight or a natural disaster in a critical market. These challenges can be identified and mitigated in advance with some careful planning.
Here are five tips to factor into planning for your coming year:
1. Acknowledge, identify and look out for new risks.
Data is increasingly becoming a critical part of operations, from production and shipping to relationships within the supply chain. If the very public breach of 40 million customer credit cards and 70 million individuals’ personal information taught us anything, it’s that hackers aren’t just movie characters. They can result in significant financial loss and reputational damage to an organization. Companies today need to keep a close eye on how their data is being shared – particularly payment information – with vendors and business partners.
2. Educate yourself on your firm’s vulnerabilities.
This extends across all parts of your operations, including labour, energy supply, market conditions, and…more and more…technical failure or sabotage.
The most favoured avenues of attack include malware inserted into software or hardware; vulnerabilities found by hackers poking and prodding software; and compromised systems that are unwittingly brought in-house. Getting out in front of this potential risk requires:
- Proper identification of the potential threats.
- Categorization of these risks (which are most likely to happen based on the business’ model and operations).
- Putting systems in place to quickly identify and mitigate problems before they arise.
3. Keep an eye on your organization’s property.
Collaboration and sharing are key aspects of a smooth-running global supply chain, but does not mean sharing all of your firm’s internal secrets with business partners and customers.
4. Factor in random acts of nature.
You may not be able to predict where the next hurricane or tsunami will strike, but you can diversify your supplier base to the point where such events don’t bring down your organization’s operations.
Companies should look to map out exactly where their critical raw materials come from and determine how vulnerable those areas are to potential threats. Use contingency, disaster and scenario-planning strategies to figure out what would happen if, say, a key supplier were out of commission for a month. Just remember the effect that the 2011 tsunami had on the electronics and automotive industries when the supply of parts and components from Japan was severely limited.
5. Diversify your supply base.
When a company buys more than 50% to 60% of it’s products from a single supplier, it places the company’s operations in peril. One labour strike, bankruptcy or building fire could leave you struggling to find a last-minute replacement (at a time when your competitors are probably doing the same thing). Have backup suppliers in place in case of emergency. Purchasing departments should look closely at the expense related to a possible supplier shutdown, versus the time it would take to seek out and align with alternative supply sources.
(based on an article that originally appeared on digikey.com)