Building resilience into a Supply Chain 4.0 strategy
Companies are looking to streamline and improve supply chains, but are also under pressure to manage supply chain disruption and meet corporate social responsibility requirements associated with their supply chains. All of this has only been heightened by COVID-19, but companies can build resilience into their supply chains by digitising their infrastructure with IoT.
Disruption is here to stay
Technology is rapidly changing every element of industry and enabling the agile adaptation of supply chains for challenge after challenge, from tsunamis to trade-wars and now a global pandemic. Today, disruption is the new normal, and it is affecting supply chains more frequently. The magnitude and frequency of this disruption has been escalating, partly due to the globalisation of supply chains, and new risks presented by geopolitical and climate change issues.
Disruption is here to stay, yet those that take advantage of disruption and changing demand are more likely to succeed. While manufacturers have suffered with supply chain disruption, online retailers such as Amazon have profited. The shift online has required many businesses to hastily adapt their business processes to ensure survival.
Prioritising supply chain investment
Supply chains have proven, especially with COVID-19, that if they are resilient and flexible, they can be instrumental if not vital to recovery. More than ever before, supply chains are on boardroom agendas due to their impact on global businesses and CSR. Traditional supply chain modelling and optimisation are changing and old assumptions, such as prioritising cost reduction, are becoming less important.
Companies are actively looking to mitigate risk. In the past suppliers were kept at arm’s length and supply chain improvements were deprioritised as they were not regarded as critical for the profit and growth. Today the focus is investment to mitigate risk and increase resilience for rapid recovery, and profit restoration. COVID-19 has been the catalyst to more businesses understanding the magnitude and importance of investing in a supply chain. Costs may increase, but so too can the chance of business survival.
Resilient supply chains not only recover from destruction, when done correctly, with the right level of investment, a robust plan and systems in place, supply chains become a source of competitive advantage and open up new and interesting marketplaces or valuable segments.
Agile, digital, connected, responsive and able to rapidly recover
When companies proactively invest in supply chain resilience, they typically manage to reduce risk exposure. However, investment in building resilience must be well planned, with resilient supply chains having five common characteristics, agility, digitization and connectivity, insight and the ability to rapidly recover.
An agile supply chain network has a flexible ecosystem of suppliers and partners where materials can be swapped, and a dual or triple sourcing strategy is adopted. There is evidence of a shift to this strategy as companies move manufacturing away from China. Companies moving capacity creates smaller more nimble manufacturing sites, which are more agile, and more able to adapt to challenges and change.
Industry 4.0 connectivity and digital transformation are creating agile operations that are more capable of responding to disruption and recovering from it. Warehouses and production lines can be fully automated, while autonomous vehicles can be used for short distance deliveries; these and other technologies, especially those based on digitisation & IoT, are providing supply chain flexibility.
This agility can help efforts to manage market volatility, especially in industries that track assets. These firms are moving towards more outsourcing or pooling, which releases capex and reduces the risk of volatility of demand.
Critical to building a resilient supply chain is the adoption of cloud-based supply chain applications, with plug-and-play interfaces for connectivity. Regardless of the manufacturer, if apps and devices are interoperable, they can be used widely to drive deeper data. Anything from raw materials through to finished product, and the vehicles that transport them, can be digitally tracked and traced, providing complete supply chain visibility of product and asset movement, to identify and respond to disruption faster.
Connectivity, or full visibility, is achieved in supply chains that are totally digitised, even operating a ‘control tower’ model, where companies have control centres to manage their supply chains. The set up resembles an airport control tower with screens flashing with continuous updates about raw and finished material, orders and production levels at manufacturing sites. Whether you own this control tower or a third party manages it for you, this model provides complete local visibility, even of global supply chains, resulting in faster reaction times when problems occur. This visibility is critical to ensure companies respond quickly to avoid being affected detrimentally. But with digitisation comes cyber risk too, so security needs to be firmly factored into a resilient supply chain strategy. The data derived from full digitisation has deep tactical and strategic value so defining a clear evaluation model is critical.
Using data analytics is critical to resilience, as it provides insight into the supply chain and enables teams to build forecasting, scenario planning and early warning systems. As the pandemic evolves, the use of continuous scenario simulation ensures that supply chains are clear on next steps in a number of different situations.
Finally, by empowering teams to problem solve wherever they are, we build company cultures that decentralise decision making. Teams on the ground decide how to deal with a situation while feeding data back into a central command, helping a business understand and manage crises quickly.
Ian Terblanche is Strategic Sales & Channel Director at Sigfox
Biden’s Supply Chain Intentions Depend on Cybersecurity
In recent years, the United States’ supply chain network has faced an onslaught of cyberattacks. The attacks have left the global superpower a shaking nation with a whole portfolio of challenges, risks, and vulnerabilities exposed to the masses. From the attack to the that breached companies like Apple, Microsoft, Uber, and Tesla, to the most recent , it’s evident that, in an increasingly digital age, cybercriminals fear no traditional governmental powers, and supply chain networks need to hunker down on cybersecurity.
Looking back at the height of the COVID-19 pandemic, western nations found themselves ill-equipped to deal with the novel Coronavirus; not due to lack of knowledge or medical inability but because supply chains were in a chokehold and supplies like personal protective equipment (PPE) for frontline workers weren’t being manufactured fast enough.
The Executive Order (EO) of US supply chains to figure out exactly where the vulnerabilities and risks are, to help institutions and organisations manage any future disruption caused by COVID-like events.
The EO focuses on six primary sectors:
- Communications and information technology
- Defence industrial base (DIB)
- Energy and power
- Public health
The listed sectors, as you might expect, are increasingly dependent on digital products and services to maintain daily operations, which increases their vulnerability to potential attacks ─ so they need cybersecurity. In fact, cybersecurity should be front-and-centre as a critical facet of the EO if the federal government truly intends to create a more robust and resilient supply chain in the face of rising criminal adversity.
Digitisation Dangers The Nation
When it comes to a globally interconnected supply chain, the ambitions of Biden’s administration are potentially a little far-fetched and off-the-mark, in reality. I say that because an overwhelming number of industry-leading organisations ─ even in the tech realm ─ still do not feel confident in their ability to deal with the vulnerabilities in their supply chain. Most of which come not from internal operations but from externals ones in the form of third parties and suppliers that they collaborate with.
According to the dated but increasingly relevant Marsh Microsoft introduction, “cyber risk has moved beyond data breaches and privacy concerns to sophisticated schemes that can disrupt entire businesses, industries, supply chains, and nations, costing the economy billions of dollars and affecting companies in every sector. The hard truth organisations must face is that cyber risk can be mitigated, managed, and recovered from, but it cannot be eliminated.”
Taking a look at the survey results reveals a telling tale: that third-party providers and supply chain operations external to an organisation are most likely to be the victim of cyberattacks and potential infiltration.
The survey found a wide discrepancy in many organisations’ view of the cyber risk faced by supply chain partners, compared to the level of perceived risk they themselves pose:
This variance is consistent across industry sectors and geographic regions, and the largest organisations exhibited the largest dissonance: 61% of companies with revenues of US$5bn or more suggested that their supply chain partners pose a risk, whereas only 19% say they themselves pose a risk to the third-parties involved:
Low Confidence in 3rd-Party Risk Mitigation Capabilities
The above paints a pretty poor picture of the overall supply chain security ─ a disconnect between large organisations and their suppliers, which could be driven by companies’ low confidence in their ability to mitigate cyber risks posed by their commercial partners. The number of companies that considered themselves “highly confident” in that area is few and far between, with only 5-15% of respondents feeling prepared to deal with the cyber risks caused by certain types of third-party providers.
So due to the very obvious lack of knowledge, it’s clear that supply chain professionals and organisations, as well as the Biden administration, should call upon their cybersecurity industry peers ─ ─ to take the fight to black hat cybercriminals.
How Cybersecurity Professionals Can Help
According to Padraic O’Reilly, CPO and Co-Founder of CyberSaint, the success of Biden’s Executive Order is heavily dependent on its stakeholders taking note of lessons from cybersecurity’s supply chain risk management initiatives, including:
- Identifying the main weaknesses along the chain of production before determining which ones can be fixed cost-effectively. Then, compare that with the cost of the potential impact ─ discover where the holes are and what’s worth prioritising.
- Thinking about the supply chain as a cybersecurity practitioner does. Cyber-risk is all about making sense of multiple data sources, and supply chain risk is the same. Don’t think about the supply chain as a single entity; rather, consider it as many entities that produce data ripe for deep risk analysis.
- Standardisation across the globally interconnected supply chain is hard, and communication is key. Cyber experts are hot on the topic, as managing risk is exactly what they do. Vulnerabilities and risk is the language that they speak in. They’ve been dealing with supply chain security for years before disruptions at the scale of COVID-19 came about.
Cross-sector collaboration with a strong focus on communication across hierarchical levels is at the very core of the cybersecurity function. If Biden hopes to see his supply chain initiative reign triumphant, his administration must ensure that efforts are coordinated across agencies, public entities, and the private sector industry. The administration must also carefully consider the potential impact of increased regulation that should be put in place following the year-long project ─ it could make or break the initiative across various sectors.
According to O’Reilly:
“The best choice is to rely on standards, measurement, and cross-industry collaboration to make this happen. Other supply chain standards, such as the (CMMC), can serve as models for a data-driven approach.
Without these considerations, we risk a lot of duplicative time, effort, and analysis, only to fail to mitigate cyber-risks and possibly result in yet another supply chain attack. We hope stakeholders will engage the information security community to bolster this project. Leveraging existing analysis by the information security community will matter to its success.”
Adapting To The Unknown
The fact of the matter is, when it comes to the US supply chain, we mostly haven’t got a clue. It’s a massively interconnected network that represents an ecosystem ─ one with risks coming from all angles and multiple points of failure. It’d be almost impossible to figure out all of the potential risks, as Biden’s initiative intends, so, according to O’Reilly, it’d be beneficial to focus not on sniffing out every single supply chain vulnerability but on advanced persistent threat (APT) incentives:
- What are the low-hanging targets?
- What do criminals want?
- What are they capable of?
“Doing some scenario modelling and talking in probabilities could lead to more informed decisions regarding mitigating risk. NIST 800-30 and the are examples of risk-quantification methods that aim to translate cybersecurity risk into dollars and cents. Understanding supply chain risk requires measurement, strong governance, input from security experts, information sharing, and advances in cyber and IT risk-management software. Instead of logging an APT's activity, start getting a fact pattern about where they may be going”, O’Reilly adds.
So the final point to the Biden administration and organisations that are working on is clear: cybersecurity professionals have an advantage over their peers because they already live to standardise data; they view risk through a lense of complexity and costliness of failure, and if the two parties can collaborate effectively, there’s a chance that security professionals can finally understand the full extent of the supply chain ecosystem and, with any luck, secure it from future attacks.