Stefan Reidy
Stefan Reidy,

12 Jun 2020

Today’s complex and extended supply chains are almost inevitably subject to disruption. While disruptions happen, the global supply chain systems need to withstand interruptions, whether they are a natural disaster, an external shock, or a socio-economic crisis. While it may be impossible for a company to escape the consequences of vulnerabilities entirely, a business with an agile supply network and effective risk management measures can thrive despite disruptions, potentially outperforming peers.

 

Anything that can disrupt the flow of goods along the supply chain is a vulnerability to be managed

 

To manage potential supply chain risks, supply chain managers and risk managers need to be aware of them to be able to implement precautionary measures and develop risk mitigation programs. A vital element of a resilient supply chain is end-to-end visibility, the ability to track products from raw materials to the manufacturer to customers and spot potential hiccups anywhere in the transit. Technology plays a key role in making supply chains agile and competitive towards multi-dimensional risks. This was also highlighted in our recent webinar titled Learning from a Mega-Crisis: How IoT-based risk management can change transportation from a cost center to a value driver.

For effective supply chain risk management, it is essential to understand what risks the goods may be exposed to while in transit.  Our supply chain risk expert, Lars ter Veer recommends assessing the supply chain risks through the “eyes of the cargo in transit”. This means that beyond looking at risks from a macro perspective considering major risks threatening the supply chain, risks need to be also assessed on the shipment level by looking into various dimensions.

 

Assessing supply chain risks through the eyes of the cargo in transit

 

Cargo risk management

 

1) Security

 

Am I of high value, do people like me – or am I already ordered on the black market? Who wants to steal or hijack me, and how, if so’?

This dimension is of high importance as security measures need to be in place to protect merchandise from theft and secure containers against unauthorized materials such as bombs or drugs. These concerns multiply when shipping goods via multimodal means through borders, ports, and airports.

 

2) Quality

 

‘What may hurt or injure me, how am I protected against it… whether by my own integrity or suitable packaging’?

Goods transported through sea or through immense distance require special care and attention concerning quality and safety. Containers traveling long distances must withstand external forces, including harsh weather conditions, temperature fluctuations, strong winds, and water currents. It may take months for the goods to be transported to the end destination or in situations of labor scarcity as during the COVID 19 pandemic. Being aware of various conditions that might affect the quality of the cargo is of high importance for planning risk mitigation activities.

 

3) Schedule

 

‘What potentially delays me on my route?  Will I reach the ocean carrier with the truck in time? And will the ocean carrier be on time too’?

On-time arrival of goods is of high importance as in today’s age of globalization; businesses rely on getting their shipments delivered quickly, efficiently, and just in time when required.

 

4) Finance

 

Are all the stakeholders in sound condition, and do they follow the compliance rules and regulations? All the stakeholders that produce me, who move me, handle me, and give me an interim home in a nice dry, warm, and secure warehouse’ are financially stable to move me from origin to destination?

Complying with rules and regulations is equally essential, along with security and on-time arrival. Increasing adverse effects on trade for, e.g., illicit activities, recalls, thefts, hijacking, etc. encourages governments and international bodies to take needed action and introduce new regulations. Allowing for each supplier and stakeholder to prove and maintain compliance is the needed requirement.

 

5) HSE (Health/Safety/Environment)

 

Am I produced, moved, handled, and stored in a way, that all the people involved are not suffering any disadvantages or threats? Or am I handled  in a way that is not sustainable, creating a negative impact on the environment? Are there any reputational risks to my owner, seller, insurer or receiver’?

To achieve a sustainable supply chain, a company has to address environmental, social, economic, and legal concerns across its entire supply chain. Taking a holistic approach reduces waste and environmental footprint, protects against reputational damage, gives significant savings and better margins, and reduces the damage we are doing to the planet. Maintaining employee safety while handling the cargo is equally important.

 

Are these parameters the key to get valid risk mitigation for any supply chain? Or is there a compromise one can make to lower the risks in the global supply chain? 

 

The answers is not about a compromise. It is about a systematical approach to identify and understand risks and to react to them. Related to the described five risk dimensions Arviem risk management experts recommend to focus on 3 main areas of action using real-time and historic data:

  • Risk Profiling – Real-time notifications about location, condition, or alerts about any disruption of cargo in transit enable a list of known supply chain risks to be compiled and create a risk profile. This gives access to a reliable risk score according to probability and consequence and identifies exactly where risks require attention.

 

  • Risk Mitigation – The advanced insights about identified risks and their profiles provide real-time intelligence and actionable recommendations to reduce disruption and lower mitigation time from days to hours. This improves customer service, reduces costs, helps with regulatory directives, ensures timely delivery.

 

  • Risk Avoidance – The detailed overview of risks and risk profiling empowers decision-making, e.g., on-demand insurance for specific events, optimize processes enabling organizations to avoid risks within the constraints of acceptable returns such as revenue and profit targets.

To follow the actionable approach in an efficient and in well balanced way, there is a need of an end to end supply chain visibility based on reliable real-time data & information about cargo in transit. This is because the old school methodology of risk management that merely involves checking a few weather reports and choosing the standard mode of transportation is no longer sufficient. Today’s complex supply chains demand sophisticated technology that enables predictive analytics to make logistics predictions more accurate. This will enable supply chain and risk professionals to make smart, data-enabled decisions more proactively. Unlike manual reporting, reliable real-time smart data combined with big data can paint a comprehensive picture of what may happen before a trip begins. This is called “data-approach” for Risk management. It is not about collecting just BIG data or much data. It is even more key to getting consistent and reliable data-quality, getting it fast, and getting a sufficient volume to receive a complete and representative picture.

This is quite interesting. Isn’t it? You will get to know more about the essential aspects of risk management from the webinar recording that can help you adopt a better risk strategy.

 

Risk Management Webinar

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