Recently, while reviewing Zurich’s Supply Chain Resiliency 2014 report, I came across an interesting statistic: 51% of respondents report having a disruption below a tier 1 supplier, however only 27% of the respondents monitor below tier 1. I began to wonder, if there is a significant probability that a company will have a disruption in the sub-tiers, why aren’t more companies taking proactive steps to monitor the sub-tiers? Then I thought about my own experiences as a risk mitigation manager in the chemical and raw material supply chain and the challenges I had monitoring the sub-tiers. It really came down to two factors: supplier trust and supply chain manager time.
Supplier Trust
When it comes to chemicals, there are only a handful of basic manufacturers of a commodity chemical. Many of our tier 1 chemical suppliers do not make the actual chemical, but buy bulk material and purify/down pack. When asked for information about their sub-tier supply chain network, suppliers lack trust that the information won’t be used to buy direct. While this scenario doesn’t happen often, getting burned once is enough to make suppliers cautious. As a result, requests for sub tier information required non-disclosures, which frequently takes a bit of time to execute.
Supply Chain Manager Time
With all the other fires I had burning around me, proactive supply chain mapping occurred in my spare time. As a result, I often relied on my suppliers to monitor sub tiers on my behalf and communicate openly with me. Unfortunately, depending on others to monitor sub tiers is risky because many of them do not have the time either. Further, being proactive with supply chain information is not always in the supplier’s best interest, as it can cause hoarding of materials by some customers. This can cause a distortion or sub-optimization in the allocation of supplier capacity by creating supply shortages for other customers.
Overcoming the Hurdles
One of the benefits of using a state-of-the-art supply chain mapping tool to achieve end-to-end supply chain visibility is the potential to successfully bridge the trust and time barriers.
Supply chain mapping and risk management tool vendors are viewed as a neutral third party in the eyes of their suppliers. In the case of Resilinc, we map, not source. As a result, the supplier base is comfortable working with companies like Resilinc, which is reflected by the fact that we have a supplier participation rate of over 90%. Further, prior to beginning the project, Resilinc will oversee a non-disclosure administration to ensure that all parties are covered. Ultimately, the benefit to customers is that you have visibility deep into the supply chain. When combined with a 24×7 disruption event monitoring service, companies have early detection and analysis of potential impacts. By sharing this intelligence with your supplier, you build trust by helping them be proactive and protect their business.
To overcome the “Time” hurdle, your vendor offering may also assign a project manager to manage the mapping process. In the case of Resilinc, this manager will coordinate and provide supplier on-boarding, data collection, quality control and data uploads. This allows you to make great strides with your supply chain mapping initiative without diverting your associates from their core responsibilities. As a result, you optimize your time to value.
So back to the original question… If there’s a 51% chance you will have a disruption in your sub-tiers, but most companies, including your competitors, don’t monitor those levels, could there be a competitive advantage in doing so? I think most definitely.
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