Supply risk mitigation must cover sustainability impacts

Leveraging data and analysis, companies can spread or share the risk, but what happens to the climate when risks are managed between businesses?

Digital technology is key to realising the potential of the supply chain, particularly in the sustainability sense. Industry 4.0 is driving major shifts across industries and the emergence of more and more data allows companies to truly measure the impacts that they have; whether they are actually doing enough to push the needle back. 

The abundance of data available today will not stand the test of time without proper treatment—some that can be facilitated using the correct digital tools to connect companies to a number of suppliers. This can ensure that production flows as it should, and that transportation can deliver the promises that data suggests. The key here, as expressed by many supply chain professionals, is to first put data into perspective, then undergo analysis to fully appreciate the insights gained, therefore determining two things: whether the data is applicable to the organisation’s goals and how it can be used to meet them. 

These procedures come in as standard for any digital supply chain, but what exactly are the impacts to be had in line with specific supply chain management targets? 

Dual sourcing strategies for resilience

Strategies for mitigating risk take various forms, but to focus specifically on dual sourcing for a moment, we understand the importance of identifying alternative suppliers or solutions in building resilience.

Dual sourcing, if not a strategy that involves multiple suppliers, as a suitable means of adjusting to global disruptions or shortages in a particular strand of the supply chain. There’s a significant demand for this across a number of industries, from semiconductor procurement in the EV sector to healthcare supplies where multiple vendors are offering similar products from different locations globally. Of course, one way to ensure geographical resilience, particularly in an organisation with sites across the globe, is the selection of a similarly configured supplier business. 

However, to truly build resilience to international events as well as isolated incidents, dealing with two or more vendors brings alternatives to this. Companies must pay attention to other factors as well, such as the cost of shifting to another vendor in the event of disruption and the reliability of their distribution. Optimisation comes with a solution that is capable of leveraging real-time data in order to visualise vendor inventories and assess the cost of shifting, albeit temporarily or on a permanent basis. 

Manage the risk of manufacturing and delivery localisation

When outsourcing manufacturing, the ability to work with multiple providers globally can present a number of benefits. Getting closer to the end customer is vital in ensuring that products are supplied locally with minimal carbon footprints, but can also leverage key resources available to different businesses. From a risk mitigation perspective, this also provides a fall back if a supplier experiences issues internally, but both the financial cost and carbon cost can also be impacted in this process. 

This is where supply chain solutions, again looking at real-time data visibility, are crucial for ensuring that customers’ needs are met in such circumstances while minimising the spike of climate impact that will inevitably come from switching to a provider in Europe, for example, if it becomes the nearest vendor following disruption at a site in the Middle East. 

“There is still no better data than that sourced directly from your own operations or suppliers on-the-ground and independently verified, which is especially the case in higher risk markets,” says Dr Kevin Franklin, Advisory MD for LRQA. “Transparent and trustworthy due diligence is nearly impossible without quality data and analytics.”

The same approach can be applied to freight and logistics when leveraging multiple businesses. “Invest in your processes to ensure you can do more with the same, or fewer, resources. This usually means automating your supply chain data, so you're finding new suppliers or managing existing suppliers,” says Brian Alster, GM North America, Finance & Risk at Dun & Bradstreet. 

Is joint risk management sustainable? 

Suppliers are also incentivised by risk, so it’s important to ensure that both strategies align. With a solution that allows sharing of data and insights from business to business, working collaboratively with supply, manufacturing, or distribution partners is much easier. Collective analysis of partnerships can determine the implications of scaling up or scaling down workloads to meet demand levels, but also buffering a reduction in capacity with another supplier. 

“To do due diligence properly, one needs a technology and analytics platform that enables real-time monitoring, benchmarking and the mitigation of ESG risks,” says Franklin

Investment in digitalisations provides all parties with more clarity of the supply chain risks, which can also be a factor that impacts how a product is designed or tested. Joint risk management from a sustainability standpoint relies on all parties’ abilities to disclose their sourcing data to determine the overall impact of a product, but also the end-of-life risks that can also have a negative effect on targets. 

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