Building and Maintaining the Supply Chain’s Integrity
Article by Claire Umney, General Manager AEB (International) Ltd.
Natural disasters can severely affect global supply chains, economic environments and whole industry sectors: In November 2012, Hurricane Sandy prompted the worst fuel shortages since the 1970s, while overall repair and preventative measures exceeded $70billion. And Thailand’s floods in 2011/12 seriously damaged the automotive and high-tech industries, with subsequent insurance claims reaching $20billion. As highlighted in a report from January 2013, supply chain disruptions have additionally been found to cut the share price of affected companies by 7% on average.
Internal factors like production delays or replenishment issues, however, can jeopardise a supply chain’s integrity just as much. As outlined in “The Greatest Supply Chain Disasters of All Time 2009” by Supply Chain Digest, Boeing experienced this first hand: while implementing a new sourcing and assembly strategy for the production and launch of its 787 aircraft, delays in the supply of a variety of boltscaused serious disruptions and major delays to the aircraft launch. Plans for the plane’s first deliveries in 2010 were at least two years behind the initial schedule. Sales worth billions were delayed, and some of that revenue was permanently lost as the collapse in the world economy led to the cancellation of orders that could have been captured had the aircraft been delivered on time.
Clearly, a supply chain doesn’t just deliver a product or service; it is also an expression of brand values. That’s why companies must continuously balance operational objectives with reputational ones. A supply chain has integrity if it can meet “objectives for quality, productivity, and financial performance” and complies with the “growing burden of legislation”, according to a 2008 study by PricewaterhouseCoopers. Most of the companies surveyed by PwC confirmed that the effects of disruptions were still apparent a year later.
The mismanagement of inventory is just one area that can endanger a supply chain’s integrity. The loss of cargo is another: there are always concerns about the safety of delivering a product to certain countries or regions due to security threats. Cargo theft delays product launches, causes consumer disappointment and increases the price of goods. Stolen cargo is also susceptible to counterfeiting; creating a whole new set of worries, e.g. public health concerns in case of prescription drugs.
Another challenge is that of keeping up and complying with countless international regulations implemented by different authorities and global trade bodies to prevent money laundering and terrorism. Having products seized by Customs for lack of compliance is likely to have serious consequences, from public embarrassment and reputational damage to significant fines and even prison sentences. So what can be done to shield supply chains from disruptions while ensuring performance and compliance?
Many problems can be anticipated and avoided, provided supply chain professionals have the right tools. Smart IT solutions can integrate whole supply chain networks and all relevant processes, thus increasing visibility, managing and mitigating risks, and ultimately maintaining supply chain integrity. They can provide transparency for all supply chain partners, including customers, carriers, customs authorities, shippers and service providers. They enable supply chain managers to achieve complete visibility of procurement, distribution and fulfilment networks, including monitoring stock movements and automated alerts or replenishment when the inventory runs low.
Comprehensive supply chain management visibility and collaboration platforms provide regulatory checks by integrating compliance and risk management solutions, ensuring adherence to export control regulations. They automatically update and manage a list of laws in the background and ensure each transaction is checked against the relevant sanctions list to detect restricted parties, critical goods or embargoed countries. They guide users through all required steps to ascertain that e.g. licensing requirements are being followed; and they stop illegal actions as soon as they are identified, reduce errors and data manipulations that can occur during manual data entry, and provide full audit trails by recording all activities. The collaboration aspect of these software solutions allows for business partner integration, adding more value for supply chain partners, who benefit from shared progress reports, discrepancy updates, regulatory requirements and performance measures within the network.
Companies wishing to make their supply chains more cost efficient and keep disruptions at bay should consider investing in smart supply chain solutions to upgrade, complement or enhance their existing IT landscape and develop their supply chains for long-term success. Cost efficiency may be the buzzword of the day, but in today’s fast paced business environment and volatile market conditions, forward-looking supply chain leaders know that without the right technology, visibility is sacrificed, growth is limited, and risks cannot be mitigated. Investing in technology helps increase competitiveness, cater for business growth, continuously improve performance and of course, build and maintain supply chain integrity.
“Building Resilience in Supply Chains”, January 2013, An initiative of the Risk Response Network from the World Economic Forum in collaboration with Accenture, http://www.weforum.org/reports/building-resilience-supply-chains
“From vulnerable to valuable: how integrity can transform a supply chain”, PricewaterhouseCoopers, http://www.pwc.com/en_US/us/supply-chain-management/assets/pwc-sci-112008.pdf