Leveraging Technology to Mitigate Global Risk
While we’re entering an era in which companies can detect supply chain risks much more quickly than in the past, new technological solutions and strategies are desperately needed to address the added complexity of global logistics.
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One of the hottest issues surfacing at this year’s annual Gartner supply chain conference was risk management, with one particular luncheon session generating dialogue that spilled out into the halls.
“When we entered this business six-and-a-half years ago, the technology for mapping and monitoring supply chain risk was still in its infancy,” says Bindiya Vakil, CEO and founder of Resilinc, a supply chain risk management (SCRM) consultancy and software developer. “Since then, the entire marketplace has been growing by exponential leaps and bounds.”
Given the number of highly disruptive global supply chain events in recent years, this should not come as much of surprise. Earthquakes, tsunamis, floods, and fires have captured mainstream media headlines and brought a greater awareness to ordinary consum¬ers about the fragility of shipping and sourcing. That awareness within our own industry has led to more vigilance when it comes to selecting second- and third-tier suppliers who must be constantly evaluated and measured for their security.
Bill Hurles, a recently retired GM supply chain executive who now serves as the executive director of the non-profit Global Supply Chain Resiliency Council, says that supply chain risk management is an “emerging” professional discipline and technology solution category that has delivered significant business value to innovators and early adopters.
“However, it hasn’t yet ‘crossed the chasm’ to mainstream enterprise adoption,” says Hurles. “What’s really needed is multi-tiered supply chain mapping that’s also proactive for post-event response strategies. Aggregating massive amounts of information can be a good start in this direction.”
Lee Young, director of supplier quality for Thermo Fisher Scientific, a global pharmaceutical research and development company, agrees that Big Data is essential, but that it can become overwhelming. “Realistically, we can only actively track about a fifth of our direct vendors,” he says. “That’s why it’s crucial to examine where to stock inventory and where to save money by keeping things lean and agile.”
According to Steve Banker, vice president of supply chain management with ARC Advisory Group, one of the most promising developments in the risk mitigation arena is the development of new software applications that can dig down to the granular level of procurement and distribution networks.
Riskmethods focuses primarily on small- to medium-sized businesses in all industries that purchase on an international basis, as does the Mountain View, California-based company, Elementum. “We spoke with some shippers who are very excited about their ‘early warning system’ for potential risks,” says Banker. “These apps ensures that proactive steps can be taken to avoid supply interruption and enforce compliance and brand protection.”
According to Banker, both RiskMethods and Elementum are designed to detect major external risks very quickly, although he allows that Elementum’s solution is a bit broader. The company’s founding CEO, Nader Mikhail, says that the startup aims to be like Salesforce.com, but as a customer relationship management (CRM) solution focused on risk mitigation for logistics managers.
“Most of managers wouldn’t even know what systems underlie their supply chain because they just see spreadsheets,” Mikhail says. “That’s led the CRM and enterprise resource planning players to be complacent and too expensive.”
Coinciding with the Gartner event was ISM’s annual conference where risk mitigation was also major topic of discussion. According to Gerard Smith, president of Global Management Risk Solutions (GMRS), a record number of shippers were registered for security briefings at the event.
“The range of shipper demands are growing, and that requires that we add bandwidth on a continual basis,” says Smith. “It’s a challenge all of us in this space are facing.”
Jason Busch, founder and head of strategy for Azul Partners, Inc. a procurement, and trade financing consultancy, says that GMRS has carved out a valuable niche by not charging logistics managers for their services. “The company is fueled by a supplier-funded revenue model that outsources data aggregation,” he notes. “Their validation service is global in scope, spanning onboarding, regulatory compliance, environmental health and safety, risk management, and diversity data.”
And this is all well and good with Deborah Wilson, a supply chain risk management analyst with Gartner. She observes that manufacturers and “brand owners” will increasingly deploy solutions that address risk for specific categories of spending.
“This strategy will allow organizations to mitigate risks quickly and with mini¬mal resources, because solutions will be purpose-built and often include baked-in risk assessment methodologies,” says Wilson.
In a recent paper co-authored by Gartner analyst Ray Barger, Jr. titled “2016 Strategic Roadmap for Supply Solution Deployment,” Wilson cites several examples of narrowly scoped, spend-category-specific solutions that address supply risk. For example, she says that the MetricStream enterprise risk management (ERM) app, identifies IT vendor technology spend—she also names Hiperos as a leader in this space.
In the “bill-of-material” analytics solutions for electronic components, Paradata is among Gartner’s niche leaders. Based in San Jose, Calif., Paradata, uses internal and external Big Data to help high tech OEMs identify cost, lead time, compliance and risk problems and offer verified insights to fix problems before they happen.
“Paradata is bringing a data-first approach to the bill of materials, uncovering fraud, and potentially creating millions of dollars of operating profit and lower cost of goods sold,” says Wilson.
One area of risk that may not be easily recognized is supply chain staffing and background checks, says Wilson. She notes that personnel-tracking function¬ality for contingent workers sourced through staffing agencies and business process outsource providers can be vulnerable to all kinds of mishaps.
Through its cloud-based vendor management system (VMS), SAP Fieldglass can offer companies a way to view their entire workforces “holistically,” enabling them to make strategic hiring decisions across all its workers.
According to Ardent Partners, a research and advisory firm focused on defining and advancing the supply management strategies, VMS solutions are the true “nexus” of contingent workforce management. “More than 400 global businesses leverage our technology to gain visibility into their external labor, project-based services including Statements of Work, independent contractors and additional flexible talent pools,” says Christopher Dwyer, Ardent’s research director.
Staffing Industry Analysts (SIA), another workforce risk consultancy, also gives high marks to IQNavigator, noting that its apps deliver SaaS solutions to enterprises in 125 countries across all four regions and is the only independent “pure-play” provider of talent management software.
Barriers to entry
Unfortunately, due to the diverse requirements involved in assessing, tracking and mitigating the various risk types, Gartner does not anticipate a rise of general-purpose supply risk dashboard technology that can cheaply consolidate and centralize supply risk data for the larger shippers—at least not over the next five years.
“Instead, cross-functional supply risk councils will be forced to manually coordinate and facilitate a high-level, holistic view for the organization across multiple solutions,” maintains Wilson.
Indeed, most analysts we spoke with agree that supply chain risk management will also be especially attractive to segmented markets. The thinking behind this is that only some suppliers with ample budgets will warrant deep analysis and detailed, ongoing risk tracking. Many analysts also question why logistics managers would even make risk assessments based on “one size fits all” when less costly app alternatives are in such abundance.
“For example, evidence of insurance may be critical for service suppliers that are on-site on an ongoing basis, whereas insurance may not be as important for a vendor that performs work virtually,” observes Wilson.
The conclusions regarding technology-based innovations in cloud delivery algorithmics (the science of algorithms) and Big Data are that they will significantly improve the impact and effectiveness of supply risk solution deployment. Getting to “board room” approval for investing more in apps addressing current and anticipated threats may not be such a hard sell for logistics managers in the long run.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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