Top 10 Global Supply Chain Risks

In modern supply chain management, change is inevitable and risk management is essential to success. Supply chain risks are evolving and becoming more prevalent over time.

Yesterday’s risk management strategies are ineffective in the changing landscape, and no mode of transport can avoid risk.

There are risks in land, air and sea freight. They are inevitable and inevitable. Poor understanding of the hazards in your supply chain increases freight spend and reduces brand equity.

Understanding the top 10 global supply chain risks can help reduce their impact.

Carriers can mitigate the likelihood of occurrence while minimizing disruption. Here are the top threats we think your business needs to consider.

1. Political and government changes

Political instability ranks 4.3 on a scale of 1-10 for concern about the impact on global trade. In Western Europe, Brexit has negatively impacted trade, creating volatility and weakening the pound sterling. This example reflects just one area of ​​concern and changing political affiliations and ruling parties in countries around the world will increase trade risk.

What to do about it

Maintain a more rigorous level of operational compliance, even when governments allow for a less rigorous approach. These reduce the risk of compliance violations and protect against the enforcement of new regulations. In addition, shippers should look to unaffiliated carriers operating outside of the affected governments, “third parties,” to meet trade requirements.

2. Economic instability

As explained by Supply Chain Digital’s Lucy Dixon, economic instability poses another threat to global trade. For example, the bankruptcy of South Korea’s seventh largest shipping company (Hanjin Shipping) led to a dramatic decline in global supply chain shipping capacity. Capacity fell 3 percent and up to $14 billion worth of cargo was unable to dock.

What to do about it

Consider ways to increase employment rates in the countries where you operate. For example, consider introducing apprenticeship programs, promoting supply chain careers among secondary school students, and working with the community.

3. Extreme weather events

Extreme weather is one of the greatest risks for sea freight worldwide. Tropical storms can dump ocean freighters like garbage. Depending on the route, tropical storms may not have been a significant threat in recent years. However, global climate change suggests that the threat from tropical storms is increasing.

What to do about it

Shippers must reassess the use of sea lanes and determine which carriers can increase shipping in anticipation of tropical storms. This allows the flexibility to scale back operations in turbulent times.

4. Environmental Risks

Another critical risk in global trade is the impact on the environment. Environmental responsibility and sustainable practices are both forms of social responsibility, and as more environmental laws are passed, ocean freight forwarders are coming under more scrutiny, says Industry Week’s Dave Blanchard.

What to do about it

Obtain raw materials from recovery centers whenever possible. Ensure that all recovered products comply with the appropriate ISO standards and avoid unnecessary disposal of waste that could otherwise be recycled.

5. Disasters

Disasters include man-made and natural disasters that do not fall into the weather-related category. For example, earthquakes and famines are two disasters that can affect world trade. According to J. Paul Dittman, Ph.D. According to the Supply Chain Management Review, up to 47 percent of shippers do not have a backup plan to ensure continuity after a natural disaster or major equipment failure.

What to do about it

Develop a robust post-disaster continuity strategy. This can include providing resources to keep it operational, using cloud-based tools, and more.

6. Connectivity

In the 24/7 world of modern commerce, global supply chain risks also exist within the connectivity of today’s systems. Although systems can be integrated through open source software, integrating and modifying systems increases risk. Each change can result in additional costs for new upgrades, and poorly integrated systems can lead to bottlenecks and disruptions.

What to do about it

Create a backup data resource. Decentralize data storage. Ensure system connectivity is on a secure network. Eliminate vulnerabilities in your systems, such as B. the encryption of personal PCs, tablets and smartphones. Avoid unnecessary changes when integrating systems and work with experienced supply chain systems integrators to maximize efficiency and profitability.

7. Cyber ​​Attacks

Cyber ​​attacks have become a prevalent risk in modern supply chain management. Someone with malicious intent could shut down entire supply chain networks and skyrocket freight rates. Cyber ​​attacks are also becoming a weapon for terrorists, so any person, government or agency could work to undermine your digital footprint.

What to do about it

Choose supply chain systems providers proven to adhere to strict cybersecurity protocols, including AES 256 encryption. Limit personnel access to the system to personnel required to process shipments and maintain strong physical security of your facilities. Penetration testing and a strong IT team can also reduce the risk of cyber attacks.

8. Data Integrity and Quality

Data integrity refers to the quality and strength of data for use in supply chain management. Incorrect data could mean less profitability for shippers and open the door to failure. Also, more and more companies tend to isolate their data from others, increasing the risk. The fear of a breach is ever-present, but data integrity can be strengthened by sharing it with the right supply chain partners.

What to do about it

Validate data for accuracy and timeliness. Old data is bad data. Systems utilizing real-time data monitoring can be a critical step in increasing data integrity and quality. Also, consider using blockchain-based technologies to retrospectively eliminate erroneous changes to data. Shippers that move to data collaboration can increase data integrity and reduce ocean freight spend.

9. Supplier Consistency

Only 45 percent of suppliers can continue working after a disaster. A disruption in supplier consistency can be the result of a risk materializing. Supplier consistency also applies to manufacturers. Raw and recycled materials are at risk of disruption.

What to do about it

Purchasing departments must take on the full load to ensure supplier consistency. This is made possible by building a diverse supplier network. Carriers should also expand the available transportation routes to accommodate changes in the suppliers used.

10. Loss in transit

Where there are risks, there is a risk of losing the ability to transport goods. Even carriers with strong networks can suffer setbacks considering the risk, so a plan to address these issues is key to success.

What to do about it

Compare ocean freight rates to see if you’re getting a competitive price. Next, identify the carriers serving your ports and explore other carrier contracts and services that can be leveraged when the current carriers are unavailable. In addition, shippers should purchase cargo or cargo insurance whenever possible to provide a safety net. This is also used to reimburse customers or B2B partners for lost freight and missed deliveries.

Proactive risk management is key to ocean freight success

Know the main risks in global freight management. Failure to understand these risks is itself a risk that will bring your business to the brink of lost profits and disruption.

Shippers need to rethink risk management strategies to include all potential risks in the global supply chain and their impact on supply chain partners.

The best supply chain strategy is doomed to fail without full risk assessment and management.

Because freight rate benchmarking enables data-driven decision-making, it lends itself to better risk management.

Supply chain risk article and permission for publication here provided by Katherine Barrios at xeneta.com. Originally published on Supply Chain Game Changer on February 27th, 2019.

Leave a Comment