PSC LIVE: The Supply Chain Risk and Resilience Summit

Global supply chains have been facing a constant set of disruptions over the last few years. From the COVID-19 pandemic, to instability in the Middle East and US President Donald Trump's tariffs, leaders have been operating under a constant state of reaction.

In this time, however, the need to take charge and mitigate the impact has become clear – in an ever-shifting world, leaders need to develop long-lasting resilience in order to properly face risk. 

At Procurement and Supply Chain LIVE: The US Summit, industry leaders explored strategies for mitigating risk in the face of disruption.

Ongoing risk

In recent years, ongoing volatility has struck supply chains in an aggressive and constant manner. US tariffs, inflation, climate change and conflict in the Middle East have put businesses around the world in a state of fluctuation. Closures of the Strait of Hormuz and subsequent reroutes have spiked costs and elongated travel times. 

As a result, businesses have had to develop flexibility and resilience in order to respond to changes while also remaining competitive. Much of the ongoing resilience strategies have included investments into AI and digital tools, though some leaders have prioritised transparency or sustainability. 

A Global Supplier Risk and Sustainability report by Achilles has revealed that there are major gaps in visibility across global supply chains, with further risks contributing to disruption and supply chain weakness. For more than 30 years, Achilles has helped clients meet their requirements by providing strong levels of transparency, carbon reduction and management across supply chains.

According to the report, only 6% of organisations reported having full visibility into Tier-2 and Tier-3 suppliers, with nearly half reporting limited or no visibility beyond their immediate supplier base. With ongoing regulatory expansion, supply chains are becoming more complex with increased exposure to external pressures. This lack of visibility creates concerns of third-party supplier risks.

Increasing pressure to adapt requires a stronger level of visibility into the supply chain, but it also requires strong contingency plans and the ability to anticipate events. 

Leaders took to the stage in the Supply Chain Risk & Resilience panel, sponsored by RapidRatings, at Procurement & Supply Chain LIVE: The US Summit. Here, they discussed their own experiences in leading transformation and risk mitigation.

The cost of fragmentation

For too long, data has been spread across manual processes, with companies having even splits throughout their departments. As demand has increased, with a growing pressure to do more with less cost and less resources, the importance of cross-company collaboration has been revealed.

Prior to this, fragmented data within a business has led to delays or mistakes, with organisations not having a collaborative nature within procurement and supply chain functions. In recent years, however, the roles of procurement and supply chain leaders have been understood as strong drivers of both efficiency and resilience.

Now, strategy meetings in leading companies have stronger collaboration, with insights shared from various role functions. 

"More and more, we are seeing companies de-siloing their risk management functions and we're increasing the communication flow across risk management functions, specifically with financial health that we measure," explains James Gellert, Executive Chairman at RapidRatings. 

"We've seen for a long time that people or companies would have someone or some team that did some form of financial assessments, but then someone over here did the cybersecurity risk, someone over here did ESG, but there wasn't a lot of communication and sharing of insights proactively across them.

"A company that is weakening starts to cut corners, but we're seeing across the industries that we have clients, that there is more attention to this connectivity.

"In order to get sub-tier visibility, you've got to make the tier ones understand why there's an advantage to sharing some of that information and then working together to get the insights you need to make the proper business decisions that should be helping you and helping the tier one."

Organisation and supply chain visibility is a significant starting point, but action also needs to be taken following these insights. If a company gains visibility into its supply chain and finds weak spots or areas for concern, but does not take action on those issues, it does not mitigate the risk it is facing. 

"It's not just about visibility. I think you need actionable visibility, you want visible supply chains, you want to make sure that it's flexible enough to meet with your forecast fluctuations," adds Abhijit Supekar, Senior Director, Global Supply Chain at Aeva.

"Then you want the availability when you want the part. I would actually say visibility, flexibility and availability are the three pillars of how actually you make it an actionable supply chain."

Balancing risks and rewards

In today's environment, supply chains cannot be risk-free. Businesses face constant changes and events which unexpectedly cause an impact. Businesses, however, can mitigate some of this risk by exploring their supplier base and making strategic decisions which can help them build resilience.

Leaders need to examine their current supplier base, with full visibility, to see where the strengths lie. There needs to be close collaboration and communication between the supply chain tiers in order to support those who need it, or to understand when a supplier offers more risk than reward to a company's operations. 

As organisations look at supplier diversification, or bringing operations closer to home with nearshoring and localisation, each new potential supplier needs to be examined closely. 

"It's all about the trade offs. You can have this reliable supplier with this price, but on the other hand, if you change to maybe a more competitive price supplier, how does that impact your operations?" wonders Laís Piccinini Doi, Associate Director S&OP - Meals at Kraft Heinz Company.

"Is it a risk that you're willing to take to get that extra productivity or not? In the end, it's always a collective decision on what we're trying to achieve. The suppliers nowadays also want more visibility. They want to make sure that they can count with the business for a longer period of time than just being one offs and all of those things plays in the negotiations that we are going to have.

"It's understanding what are the risks that we're really willing to take based on the potential scenarios that we are going to be choosing from to move forward with the business. 

"Things are going to change and they're changing fast. We don't have control over everything. Always have a plan B, a plan C, a plan D, so you can keep up with your supply chain, but also giving continuity to the business. We can do the best we have with the information we have on hand right now. It's not going to be perfect, but it's better than nothing." ​​​​​​

Through developing strong strategies, with collaboration both within the companies and in the supply chain, businesses can take small but vital steps to developing resilience amid ongoing risk. These changes come with multi-tier visibility and a flexibility to adapt plans.