Almost every article about supply chain risk management begins with the complexity and global reach of today’s supply chains. Over the last fifteen years, companies have made some very critical supply chain enhancements – sourcing from low cost countries, outsourcing manufacturing to sub-contractors across the globe, and going lean. I characterize these enhancements as Supply Chain 2.0.
The outcome of Supply Chain 2.0 is that in effect, we have stretched our supply chain and left very little room to absorb even minor blips and disruptions. We have very limited, or no information about a vast majority of our suppliers. At the same time, this global reach has created many additional areas where the supply chain is exposed to disruptions. Port delays, transportation delays, increased material handling and product damage, long inflexible transit times, local business environment and infrastructural dependencies etc. Most companies are unaware which global regions they have exposures to until a supplier calls to extend lead time for a critical component.
Often after a supplier calls, the company scrambles to find out which other suppliers might be in the impacted zone and what other parts or products might be disrupted. And when there are hundreds of suppliers, where do you start?
We have found in working with our clients that raw material or component disruptions are the most frequently occurring events that disrupt their supply chain. Some are rooted in catastrophic events but often the problems build up over a period of time. For example, Chinese New Year comes around every year. Yet, without adequate knowledge about which suppliers are located in China, customers have no way to determine which suppliers they should proactively work with to build ahead.
Dependence on scarce raw materials, capacity utilization trends and products dependency mapping is another area where proactive management is essential. For example, the Apple Watch has experienced launch delays because of the failures of a critical supplier, one of Apple’s main sources of scratch-resistent sapphire goods.
Over 80% of enterprises suffered at least one supply chain disruption this past year (BCI/Zurich, “Supply Chain Resilience 2014”)! This alarming statistic proves that we have arrived at the point where strategic investment in resiliency is no longer optional.
51% of disruptions originated below their tier one suppliers. And 74% of companies do not even have full visibility into their supply chains. This remains increasingly important as 24 cases of unique supply chain events or disruptions can occur somewhere in the world each month. That is, roughly one every day.
The next generation of supply chain innovation will be driven on the resiliency front, what we like to characterize as Supply Chain 3.0. This is the resiliency-optimized supply chain. And we believe that the very foundation of the new paradigm is supply chain mapping.
Supply chain mapping to identify origin and path of components as a capability is no longer simply a nice thing to have. A robust mapping platform provides a foundation for a rich set of analytics that can help large corporations with extensive and complex supply chains to make quicker decisions, proactively identify vulnerabilities, quantify exposures and take evasive action.
Supply chain mapping also drives capabilities beyond just risk management. Country of origin, localization, carbon footprint analytics, currency risk and pricing trends, fuel price impact analytics – these are just some examples of capabilities that would be enabled. In short, this is an investment that pays off many times over.
You can read more by Bindiya Vakil, CEO and Founder of Resilinc, here on her series on supply chain resiliency management.