One of the biggest responsibilities of supply chain managers is to implement risk management programs. However, as the number of disruptions threatening businesses continues to increase, it is becoming more difficult to ensure end-to-end security.
A.T. Kearney, in collaboration with Rapid Ratings International, recently announced the release of its latest report on supply chain trends. The study addressed a wide range of topics, including the decline of risk management, issues procurement is having with resiliency, how the role of supply chain leaders has changed over the past 10 years and strategies for improved performance and protection.
"For most organizations, it is not a matter of if but when a supply disruption will occur. Although most acknowledge this fact, few have invested in the systems and programs needed to respond," A.T. Kearney Procurement and Analytic Solutions Vice President Carrie Ericson stated.
Emerging global supply chain trends
The report identified a dozen of the biggest trends that are - and will continue to - influence global supply chains, some of which are summarized below.
- Global terrorism and extremism: Given the surge in terrorist attacks that have occurred recently, government agencies across the globe are working to gain more control. As this happens, there will likely be new policies and regulations that could impact global shipping, trade and banking.
- 2020-Seven growth economies: The seven emerging markets that are expected to reach a strong level of performance over the next few years are Mexico, Poland, the Philippines, Peru, Chile, China and Malaysia. Because all these areas have high-quality labor forces and infrastructures, solid regulations and sound plans for reform, it is safe to assume that businesses will leverage them to create more valuable supply chains.
- Geopolitical instability and realignment: According to the report, The International Monetary Fund expects that, by 2020, Brazil, Russia, India, Indonesia and China will have some of the biggest economies across the world, possessing more purchasing power than both the United Kingdom and France. This could lead to the need for global supply chains to compete for tier 1 suppliers and intensify the pressure to develop strategies for better supply and demand.
- U.S. economic growth: The source revealed that the American economy is predicted to grow at a rate of at least 2 percent every year for the next four years. An improved labor market and rise in consumer demand have contributed to a strengthening global economy - with the U.S. the main driver behind it. As a result, the cost of importing goods domestically is decreasing, which, the report stated, "improves the competitiveness of supply chains."
- Global climate change: The occurrences of extreme weather conditions and natural disasters are on the rise, with global warming and climate change indicating they will only continue to threaten supply chains. However, the report also pointed out that not all of the fluctuations are negative. Ice melting in the Arctic has created the opportunity to develop new shipping lanes and increased access to minerals, oil, gas and other natural resources.
- IT disruptions and developments: Although technology allows supply chains to improve the efficiency and cost-effectiveness of operations, it also puts businesses at increased risk. This is why it is likely that companies will need to invest in implementing better management and risk identification systems.
The source also gathered information from social media mentions to determine some of the top supply chain concerns today's businesses have, which are climate change (20 percent), IT (16 percent), sustainability (16 percent), commodities (14 percent), regulatory environment (12 percent), geopolitical (8 percent), financial (7 percent), ethics (4 percent) and contracts (1 percent).
Securing a safe supply chain
The more a supply chain grows, the harder it is for a business to manage it and, therefore, successfully implement risk mitigation. As a Risk.net article recently pointed out, having to monitor an extensive list suppliers for the wide range of factors that could disrupt operations - from product quality and supply continuity to the use of conflict materials or forced labor - is overwhelming for managers.
And perhaps this is why there has been a lack of it recently. The A.T. Kearney report found that almost half of supply chains do not have an official plan or strategy that allows them to guarantee business continuity in the event of a disruption. Just one-third of them verify that their respective supplier networks are environmentally sustainable.
Clearly there is a need to improve the process of supply chain risk management. To do this, Risk.net suggested that companies leverage technological solutions that can help perform and monitor various tasks and activities. For example, supply chain software can help business leaders identify, categorize and defend against risks using a system that would otherwise be time-consuming, fragmented and unreliable.