Q&A: Optimising SCM Strategies for Today’s Greatest Risks

In an era where "business as usual" feels like a distant memory, navigating global supply chains sometimes feels like it requires a crystal ball.

Instead of relying on guess-work, the Supply Chain Digital team decided to chat to two industry leaders from Sompo International, a global specialty insurer.

Jess Harris, VP and Risk Control Life Sciences Leader, is known for demystifying complex exposures in the biotech sector. She is joined by Jennifer Berube, VP and Risk Control, Specialty Technical Leader whose technical approach helps firms harden their operations against geopolitical and cyber disruptions.

Together, they offer a front-row seat to the risk-control strategies keeping the life sciences sector – and our global economy – on track.

What are the current challenges facing global supply chains and how can organisations effectively respond to them?

Jess: The global supply chain landscape is currently evolving at a rapid rate, causing significant disruption as increases in cargo theft, geopolitical instability, climate change and cybersecurity threats put a strain on the supply chain.

To effectively address and mitigate these emerging risks, organisations must create a holistic, optimised supply chain programme that addresses crucial areas of supply chain management and minimises disruption. 

What specific strategies should organisations implement to effectively prepare for these emerging risks?

Jennifer: An important first step is to create a dedicated supply chain team that oversees the supply chain process, manages relationships and maintains inventory.

Organisations should then conduct supplier monitoring – including physical audits, business continuity questionnaires and evaluation of performance standards.

Contractual risk transfer can be established through the use of favourable contract language. And finally, organisations can optimise logistics, including warehousing, storage, transportation and delivery. All these strategies can contribute to limiting supply chain challenges and ensure the organisation’s ability to respond efficiently in the event of disruption.  

To ensure the optimisation of the supply chain programme, the team should also create a common set of requirements that address the protocols surrounding load management, security measures and driver management controls. Ensuring there is no gap in your insurance coverage by conducting a thorough review will allow for any disruption to be short-lived if a key supplier region is impacted by an emerging risk. 

Extreme weather events appear to be significantly impacting every industry sector. How is climate change impacting the global supply chain specifically and how can organisations adapt their supply chain management strategies to address it?

Jess: The problem is certainly pervasive; Economist Impact recently reported that more than 99% of surveyed executives say that climate change impacts their supply chain.

As extreme weather continues to cause disruption, organisations must evaluate and identify the suppliers that are key to operations, noting their geographic location. If suppliers are centralised in one region and that region is impacted by a climate event, this can cause a devastating ripple effect throughout the entire supply chain.

Geographically diversifying suppliers can help ensure that climate-related disruptions are limited – should a nat cat event occur – to only a portion of the supply chain. 

Cargo theft was another major risk impacting the supply chain this year. Going forward, how can organisations manage the rise in cargo theft? 

Jennifer: Today, organised crime groups are exploiting helpful technology meant to streamline the supply chain process and are using it to intercept cargo.

An established set of security and preventative measures should be put in place to help mitigate the risk, and one way to do this is to focus on logistics optimisation.

Organisations should look to optimise warehousing, storage, transportation and delivery by focusing on factors such as route planning, inventory tracking, warehouse management systems and setting clear expectations for common carriers.

Having a clear plan that optimises every step of transportation and communication will help to mitigate the risk of cargo theft and help organisations protect themselves from attacks. The use of AI and IoT devices will also allow for real-time data and insights into these logistics, enabling organisations to spot suspicious activity and possibly prevent loss.  

What management optimisation strategies can organisations adopt to mitigate cybersecurity threats facing the supply chain? 

Jess: Logistics optimisation can allow organisations to protect themselves from cybersecurity threats.

In addition to leveraging technology to steal cargo, crime groups are initiating cyberattacks that are majorly disrupting the global supply chain. This is a lucrative target for cybercriminals because there is such limited oversight; in fact, according to the World Economic Forum, only 27% of supply chains are regularly monitored and evaluated by their customers. 

Cyber criminals tend to target entire supply chains, increasing organisations’ third-party risk exposure.

Companies can mitigate this through well-negotiated written contracts with suppliers and third-party vendors, which should allocate responsibilities, outline compliance with regulatory requirements, and specify remedies for any attacks.

Additionally, contracts should include mechanisms for dispute resolution and indemnity clauses. Integrating cybersecurity clauses into supplier contracts will fortify the organisation’s cybersecurity framework and ensure increased resilience to cyber threats and help protect an organisation’s most valuable assets.

Taking these steps will limit any disruption, limit the compromise of sensitive data and ensure relationships across the supply chain are protected. 

What is the impact of geopolitical instability on the supply chain and how can organisations address it?

Jennifer: Geopolitical instability is a prevalent theme in our world today and it can cause massive disruption of global trade flows, limiting market access and delaying the delivery of essential materials.

To prevent disruption, organisations should make sure their supply chain optimisation strategy includes contractual risk transfer.

By using detailed, favourable language with suppliers, businesses can ensure that comprehensive insurance coverage is established if the supply chain is affected by geopolitical instability and can ensure they are protected from direct losses.  

Why is supply chain optimisation so critical and how can organisations use it to manage risk? 

Jess: Optimising supply chains is essential for maintaining resiliency and managing your supply chain risk.

The current state of the global supply chain is turbulent and rather unpredictable.

However, assessing present and emerging risks to create an optimised supply chain management programme will ensure organisations are equipped with the necessary tools and protocols to navigate the landscape.

In a volatile environment, optimisation is a competitive advantage and developing a strategy for each key threat will allow companies to be prepared and responsive if these threats impact them.