However, the two most prominent and ever-present pressures – reducing costs and reducing risk – are also, unfortunately, often at odds with one other. A solution for one will usually make the other more difficult. Cost reduction can be achieved through lean practices; supplier rationalisation and use of fewer distribution facilities, as well as just in time (JIT) inventory management and service outsourcing. However, all of these actions also have the potential to expose your supply chain to greater risk. Looking at it from the other angle, putting extra checks and balances in place to control supply chain risk will usually create an extra cost for your business. So, what should supply chain leaders prioritise?
In a turbulent political environment, supply chain disruption is a key concern for businesses at present. But it isn’t the only supply chain risk which can be costly. For instance, businesses should also take the time to ensure that compliance with health and safety legislation continues to be prioritised by each one of their supply chain partners, particularly since the implementation of ISO45001 in March 2019. The new regulation requires employers to manage risk across their entire supply chain, by expanding the definition of ‘workers’ to include both employees and contractors[1].
Linked to this – and a further factor to consider when assessing the potential cost of risk in the supply chain – is Corporate Social Responsibility (CSR). This might mean something slightly different for every organisation but sustainability, a focus on social enterprise and responsible approaches to modern slavery are just some of the issues currently at the top of the agenda for businesses, thanks to increased pressure from investors, stakeholders and customers. Sustainability in particular is under the spotlight right now, and likely to remain so while our nation works towards its net zero ambitions. If you don’t insist on sustainable practices from your supply chain, you risk jeopardising your business’ green credentials, no matter how hard you work on them internally.
There are both short- and long-term benefits in insisting on ethical and sustainable practices across your supply chain. In the short term, you stand to improve your brand reputation, attract more business and secure better levels of funding. In the long term, you will protect what has been described as the ‘triple bottom line’[2]: people, profits and planet. Sustainable practices benefit today’s businesses and give them resilience for tomorrow; they also create a positive impact for employees and communities, and ensure that there will be the resources and economic strength to support businesses in the future. While the initial outlay associated with implementing CSR measures across the supply chain may give some businesses pause, the ongoing value and growth opportunities CSR delivers must always be considered.
Eliminating risk from supply chains is perhaps more difficult now than ever before, mainly because supply chains are more complex but also because it’s easier to fall foul of shifting regulation. For businesses who want to proactively take measures to control risk, there are three main things you should consider doing:
While using fewer suppliers – or more local suppliers – can trim costs, diversifying your supplier base can help to protect you from disruption. For example, think about using suppliers who use secondary ports, or suppliers in different geographical locations even if equivalent materials are available from suppliers in the same location. That way, you won’t be affected by disruption in one country or region.
Effective communication is a key strength of every successful supply chain. Think about creating a shared risk management plan with supply chain and logistics partners and aim to create a culture in which they can talk to you about their concerns and share information on potential issues or disruption. Working in this way will not only give you advanced warning of problems and allow you to take mitigating action, it will also give you the opportunity to draw on their local or specialist knowledge to find a solution and ensure the best possible outcome for your business.
Technology can help you coordinate pre-qualification, monitor performance and manage your supply chain compliance. Done well, it can also give you better visibility, not only of every site but also of every worker. At its best, technology doesn’t just help you keep track of the status quo, it will also enable you to drive operational improvement. The crucial thing will be finding a technology partner that understands your world – and software that can be tailored around your individual requirements.
Altius client SEGRO was struggling to eliminate inconsistencies in its supply chain but couldn’t find a software solution that offered all the functionality they needed – specifically ultimate visibility on a multilingual basis. They are now using Altius’ platform and consistently maintaining more than 90% compliance across their supply chain. Read the full case study to find out more: https://www.altiusva.com/blog/case-study/segro/
[1] https://www.iso.org/iso-45001-occupational-health-and-safety.html
2 https://www.supplychaindigital.com/supply-chain/why-sustainability-has-extend-down-supply-chain
