Supply chain management has always come with a wide range of risks—from capacity issues to operational disruption to inheriting the risks of a supplier. Recently, raw material shortages, climate change, and trade wars have come to the forefront of concerns. Regardless of a company’s size or the proximity of its suppliers, it’s likely to feel the impact of global risks like these. Risk managers are taking note. In Lockton’s 2018 Risk Management Survey, supply risk was among the top issues risk managers wanted to discuss more within their organizations.
As supply chains become more complex, so does the management of related risks. Manual management techniques or legacy technology previously used in performing the job may not work for addressing today’s challenges. “To make the best decisions, managers need access to real-time data about their supply chain, but the limitations of legacy technologies can thwart the goal of end-to-end transparency,” states the Harvard Business Review article The Death of Supply Chain Management.
Using the right technology, risk management teams and supply chain teams can take control. A fully integrated risk management information system (RMIS) with built-in automation and data analytics can help eliminate manual labor, increase efficiency, and allow for more accurate predictions. Ultimately, this can save companies money, and aid in avoiding supply disruptions that could take a business under or severely damage its reputation. (Read more about the far-reaching consequences of reputational damage due to supply chain failures.)
“The trend is clear: Technology is replacing people in supply chain management — and doing a better job,” write the authors of The Death of Supply Chain Management. But this doesn’t mean that risk managers and supply chain analysts will become obsolete. In fact, it likely means their knowledge of risk management software and their strategic vision will continue to be needed more than ever. “In the near term,” the article continues, “supply chain analysts who can analyze data, structure and validate data sets, use digital tools and algorithms, and forecast effectively will be in high demand.”
The following RMIS tools can empower staff in dealing with ever-changing supply chain risks:
1. Risk assessments
With increasingly complex supply chains, organizations can benefit from an organized approach to understanding the risks associated with suppliers and vendors. Comprehensive risk assessments (also called risk report cards) can help in the development of risk profiles for all suppliers.
Customizing risk assessments for each supplier takes risk management to another level. For example, a grocery store chain can customize assessment questions by making the questions applicable to produce vendors, specifically; another assessment might then be customized to use a different set of questions that apply to deli counter suppliers. The tailored data generated by responses to customized risk assessments can be used to paint a more accurate picture of potential issues tied to one or more suppliers. When combined with other considerations, such as how critical a supplier’s material is to an end product, this data can be used to rank suppliers into risk tiers and determine the depth of evaluation or auditing warranted.
2. Data collection and analytics
If understanding a supply chain’s overall risk profile is a giant puzzle, data points are the individual pieces. The more data an organization can gather, the more complete the picture becomes. More data—including financial data—leads to better insight.
The data collection process thrives on software that can act as a central repository. Siloed data serves little purpose. The Supply and Demand Chain Executive article Checklist: Four Steps to Mitigating Supplier Risk and Protect Your Supply Chain states that organizations should “aggregate supplier information and required documents in one system. A best-in-class approach to aggregating these data is to create an interactive supplier portal and allow suppliers to log in and supply the information themselves.” A RMIS like Origami Risk features data collection tools that allow for not only collecting directly from the source, as the article above recommends, but also integrating with existing technology for simplified data migration.
Consolidated data can then be used for deep-dive analysis, such as internal benchmarking. As stated in The value of benchmarking in the claims process, “Internal benchmarking [treats] individual departments or business units as friendly ‘competitors,’ with the top-performing department’s strategies studied and shared broadly to replicate improvement. Origami’s flexible and scalable RMIS allows for data collection from anywhere within an organization—any department, any office, any line of business.”
Data gathered from risk assessments comes into play here, as well. The Supply Chain Management Review article Five Techniques to Manage Supply Chain Risk states that “an overall scoring matrix for a segment of suppliers can be shared with all to provide a benchmark for expected performance among suppliers.”
Beyond benchmarking, built-in data analytics can be used to outline trends and trigger notifications when a risk exceeds a predetermined threshold. These trends also outline how an organization is performing over time (rather than just one assessment at a time) and can indicate if things are heading in the right direction. According to Checklist: Four Steps to Mitigating Supplier Risk and Protect Your Supply Chain, “By repeating the analysis and trending the information month-over-month or quarter-over-quarter, you gain a bigger picture as to how your supplier performs and what are acceptable behavior thresholds. Additionally, you can gain a better understanding of how your own organization performs.”
3. Automated Workflows & Reports
Increasingly complex supply chains can also contribute to miscommunication, oversight, and error. Where production was previously more straightforward—raw material supplier to manufacturer to market—“nowadays, shorter product lifecycle and increasing demand among all have led to a complicated supply chain,” states the research paper Identifying risk issues and research advancements in supply chain risk management. “Due to cost pressure and competitive advantages, companies are adopting globalization and outsourcing strategies. This also requires an extended supply chain network, hence increases the nodes in the system.”
To build a supply chain machine that runs consistently and effectively at any size or level of complexity, the left hand must know what the right hand is doing. “Risk managers are often well placed to implement key measures to reduce risks associated with supply chain failure and to ensure superior supplier community performance,” states the article The strategic importance of risk managing the supply chain. “They would therefore be well advised to take a greater interest in the challenge of design and operation within the supply chain and should develop a series of corporate measures that will properly monitor decisions taken lower down.”
Risk managers and supply chain analysts can set up automation to do just that. When specific actions are completed at one end of the chain, stakeholders throughout the process can be made aware and directed as to further action.
Automation also allows for the real-time delivery of information and increases the likelihood of immediate action. Being alerted to supply shortages immediately, as opposed to weekly or monthly, can be the difference in whether an organization remains competitive in an industry. According to an article in Supply Chain Dive, Molson Coors recently rolled out real-time data to help farmers and agronomists “make data-driven decisions to mitigate risk, such as whether to delay harvest or how quickly to harvest crops and move them to grain elevators. Molson Coors also uses the data to make longer-term, proactive decisions about farming techniques.” Having real-time data related to key factors (such as weather conditions in the case of Molson Coors) is crucial for making informed decisions, as quickly as possible, that can prevent disruptions throughout the supply chain.
Finally, flexible dashboard and reporting capabilities help ensure risk management and supply chain team members have a comprehensive view of risks and the measures being taken to manage them. These dashboards and reports can be customized for each recipient so that stakeholders see progress in a way that makes sense to them, thereby facilitating full buy-in across the organization.
An important part of supply risk management is tracking suppliers’ certificates of insurance (COI). “Any procurement team that is proactively managing the three-legged stool of risk protection must have resources in place to proactively collect and knowledgeably review COIs,” Mark Trowbridge says in the article Five Techniques to Manage Supply Chain Risk.
COI management is neither straightforward nor easy. Handling the process manually or through disparate systems takes an abundance of time and effort. As a result, staff is pulled away from more high-level tasks. The process is, nonetheless, essential to understanding supplier risk and must be a priority. “All too frequently, procurement groups fail to demand a properly executed and endorsed certificate of insurance (COI) from each contracted supplier before contracted actions occur,” Trowbridge continues in the article. “I’ll admit, it’s a pain to collect and properly review COIs from every contracted supplier. But studies performed by leaders in risk management groups indicate that 80% or more of initial COI submissions do not conform to the language in the customer’s contract.” Such nonconformity opens up the potential for incidents for which an organization could ultimately be liable.
With help from an integrated RMIS like Origami Risk, COI management can become significantly more streamlined and compliant. The system can track COI status and automatically send condition-based emails notifying key parties of approaching expiration dates or process completion. This proactive approach helps eliminate errors, ensure compliance, and keep the process moving consistently, all of which free up employees’ time to focus on more high-level, strategic supply risk management goals.
Origami Risk has the right functionality to assist with supply risk management
In the rapidly changing field of supply chain management, risk managers still play a crucial role in supply risk management—either by assisting the supply chain team or by incorporating supply risk into their existing initiatives. By leveraging technology like Origami Risk, risk managers can save their organization time and money, and avoid severe business disruption and reputational damage that comes from supply chain errors.
Speak with our RMIS team today.