Balancing supply chain sustainability and risk management

on Monday, January 25, 2016

Balancing supply chain sustainability and risk management

With the new year underway, global supply chain, procurement and logistics companies are assessing what market changes will mean for business and which strategies will be most cost-effective.

This week, Spend Matters revealed some of the obstacles procurement providers can expect to see in 2016. In an interview with the organization, riskmethods Founder and Managing Director Heiko Schwarz said that some of the main issues supply chain executives will be presented with will be in the areas of globalization, regulatory compliance and mounting external threats.

Schwarz indicated that, although natural disasters and weather disruptions have always been a risk for supply chains, they will be even more so this year. The source also said that the globalization trend is fueling companies to seek supplier relationships in regions they never have before. In addition, increasing operational costs in China are causing more corporations to source elsewhere.

Globalization also makes supply chains more vulnerable to complications and, in part, has contributed to elevated levels of pressure to comply with regulations. Risk management, Schwarz added to the source, is now an absolute necessity to ensure this compliance." To minimize susceptibility to supply chain disruption, Schwarz revealed that his company will use automation tools to identify potential threats.

Leveraging data and analytics
The traditional model of companies has typically been to follow a linear supply chain starting with raw materials and ending with the customer. However, as Adam Robinson pointed out in an article for Cerasis.com, over the past year, the industry saw a change it the economy that now suggests a more effective approach to adopt is a circular, rather than "closed-loop" supply chain.

However, in order to properly implement this model, the source explained, it would be beneficial for industry managers to leverage reverse logistics. In addition to cost-reductions, this data can also lead to more market share and increased volume. Robinson also pointed out that using reverse logistics can lead to higher return on investment from equipment.

Making sure proper plans and systems are in place in the event of a disaster is not the only way supply chain leaders can help protect operations and, therefore, increase sustainability.

While many companies know data can be used to optimize supply chain operations and, therefore, have begun converting to converting to cloud-based systems that offer more flexibility and increased insight, it also comes with a number of security risks. But are these potential threats so major that some businesses should continue operating in silos?

Isabelle Grenon of Pivot 88 recently argued that they are not and that "by laying [a] cloud-based solution on top of existing legacy systems, rapid integration, improved quality and reduced cost can be achieved in weeks instead of years."

Improving sustainable practices
In its effort to reduce risks of disruptions while still managing to be sustainable and efficient in operations, some supply chain leaders are at a crossroads. This predicament is understandable since, as Ian Lefshitz, a contributor to Supply Chain Executive, worded it, "While there are obvious long-term benefits to more sustainable practices, a major challenge for corporations and procurement professionals in particular is ensuring that the entire supply chain meets established standards."

To maintain a healthy balance, the author recommended companies practice transparency while also promoting accountability. Lefshitz said that it would be wise to partner with a third party that can oversee the sustainability sector of the business to identify any weaknesses or risks, as well as making sure all suppliers are adhering to supply chain standards and replacing the ones that are not.

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