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Trends and Predictions in Supply Chain Risk Management

02 February 2015 13:20

The best word to describe today’s supply chain is complex. Organizations’ supply chains have become more global and interconnected over the years, which have left them increasingly vulnerable to a great amount of risk. What’s more, the unpredictability of today’s global marketplace, economy, and financial markets will only make it more difficult for business leaders to thwart risk.

Supply chains have become more global, complex, and interwoven. Businesses today are open to a variety of threats that historically may not have been as impactful to their supply chain. In hopes of reducing costs, companies have created leaner supply chains, for example, basing production where labor costs are significantly lower, taking the “just in time” inventory approach, and reducing their distribution facilities. While these practices have helped companies improve their bottom lines, they’ve also greatly increased risk.

Supply chain business leaders are tirelessly working to understand what impact these new parameters will have on the design of their supply chains in the future. To remain viable, companies will be forced to re-evaluate their risk management strategies to meet the challenges that lie ahead.

Catastrophic events are the number one thing that businesses are fearful of because they are very hard to predict. A supplier can be shut down overnight and businesses don’t have any way to mitigate that because they’re trying to operate in a lean way.

Using Toyota as an example, the car production in Japan plummeted 62.7 a few years ago following a devastating earthquake and tsunami. The magnitude-9.0 earthquake and tsunami destroyed many factories in northeastern Japan, causing severe parts shortages for Toyota and other automakers.

According to many industry pundits, multitier visibility is another point of contention for supply chain leaders. Today’s supply chains involve hundreds, even thousands of suppliers, from around the world. Not only does this leave companies highly susceptible to risk, but it also makes multitier transparency nearly impossible. In a survey conducted by Aberdeen of more than 100 companies with predominantly global supply chains, 63 of respondents indicated supply chain visibility as a high priority.

Predictive analytics is used to determine the outcome of an event as well as the likelihood of a situation occurring using a variety of statistical techniques such as data mining. Essentially, it takes operation data within an organization’s existing system and turns it into actionable business intelligence which can be used to mitigate risk, optimize future decisions, and create a “smarter” supply chain. What’s more, the technology gives organizations clearer visibility into supply chain operations and market activity so organizations can foresee challenges and respond to them proactively.

The supply chain will only continue to get more complex and vulnerable. Luckily, there are sophisticated solutions available today that will help business leaders mitigate these risks.

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Ruby Tang

Ruby Tang's Profile

Head of Risk Management Solutions and Sales & Marketing Solutions, Dun & Bradstreet (HK) Ltd

Ruby is a veteran in the Business Information Industry with over 15 years of experience. She has a rich background in risk assessment and sales &...