Global supply chain risks rise

  • Chris Laws

Global supply chain risks rise

Chris Laws, Head of Product Development – Supply & Compliance at Dun & Bradstreet explains how data can keep transport businesses on track

Uncovering supply chain risks is key to making the best business decisions and protecting the reputation of a company. Human trafficking is just one of the many supply chain risks companies face. According to a recent study, the UK imports £14bn worth of goods every year that may be made illegally. Last year, John Lewis and Habitat were forced to withdraw kitchen worktops when they uncovered human slavery violations in their supply chain, proving even major brands are susceptible.

Managing risk is a key challenge for all organisations across industries, whether a business is a start-up or a multinational. Changes in the political and economic environment add to the complexity of trading arrangements and the volatility of supply chains, so having a transparent view of supplier and partner relationships can be a crucial first step to understanding and limiting potential exposure.

Unpredictability increases transport supply chain risk

Different industries have different types and levels of exposure to risk. A recent Dun & Bradstreet report, published in partnership with Cranfield School of Management, found an increased supplier risk (20%) in the first quarter of 2018 in the transport sector, suggesting a much greater dependency on a limited number of suppliers than in other sectors. In fact, transportation saw the biggest increase in risk exposure of all sectors, with four out of five key measurements increasing over the period.

While the sector arguably benefits from localised relationships that are often regional or national, global sourcing risk – the measure of suppliers located in high-risk countries – continued to climb. The Cranfield report also found an increase in market volatility. As sterling fluctuates, Brexit arrangements remain uncertain, and worldwide political disputes take effect, businesses will have to deal with increased financial risk. Coupled with the high supplier risk, the transport sector’s exposure to supply risk is significant. So how can a business keep its head above water and grow?

Data can reduce risk and accelerate success

Feeding relevant and accurate data into the supply chain can be vital to maximising growth, profits, and revenues. Layering third party data onto a company’s existing data set will often reveal risk issues. By having the right data on hand, procurement professionals can predict and protect the business against risk. The ability to identify and assess risk is essential for businesses to ensure successful growth and protect their reputation.

Access to clean information on every operation in the business can also uncover cost efficiencies in the supply chain and provide vital intelligence on spend. Companies that use third-party information to manage supply chain relationships, especially when combined with a company’s own data and historical information, can gain a comprehensive view of all relationships.

Business growth and risk are intertwined

The first half of 2018 has been defined by regulatory changes, updates on Brexit negotiations and high-profile business insolvencies. The General Data Protection Regulation (GDPR) was introduced in response to the increasing availability and changing use of digital data, while the government rightly prioritised human trafficking and required UK businesses to submit modern slavery statements. The collapse of Carillion was one of many examples that show the significant impact a foreclosure can have on suppliers; around 30,000 contractors and creditors were left owed £2bn.

In an always-changing, global economy, data is an essential tool for the modern procurement team. The supply chain needs to be transparent and information needs to be managed and monitored effectively; ‘dirty’ or inaccurate data can have unintended consequences. By gathering the data available, businesses can identify and screen potential suppliers and gain visibility into ownership structures of their current suppliers, resellers and distributors.

By doing this, organisations – in the transport industry and others – will avoid penalties and reputational damage, successfully mitigate risk and grow the business during periods of uncertainty.

 

2018-08-31T14:54:46+00:00August 31st, 2018|Magazine, September 2018|