Supply Chain Risk Management: Problem Background and the Practical Approach

Supply Chain Management

Date : 04/25/2022

Supply Chain Management

Date : 04/25/2022

Supply Chain Risk Management: Problem Background and the Practical Approach

Gain insight about modern supply chain risks and how Tredence’ s intelligent, end-to-end supply chain solution is a practical approach dictating the future of B2B industry

Shubhankit Verma

AUTHOR - FOLLOW
Shubhankit Verma
Senior Manager, Supply Chain Practice

How Supply Chain Analytics Drive Effective Supply Chain Risk Management
Like the blog

Table of contents

Supply Chain Risk Management: Problem Background and the Practical Approach

Table of contents

Supply Chain Risk Management: Problem Background and the Practical Approach

How Supply Chain Analytics Drive Effective Supply Chain Risk Management

The global economy is a fragile construct. Supply chain disruptions cost organizations an average of $200 million each year, which poses serious threats to their company's bottom line and reputation in the marketplace. A few risks that top the chart are:

  • Extreme weather events
  • Economic instability
  • Political and government changes
  • Ocean freight bottlenecks
  • Supplier inconsistency
  • Quality of raw material

Therefore, managing global supply chains in an increasingly uncertain world is extremely challenging. Today, business executives are concerned about the potential risks threatening their entire network flow and the economy. This blog introduces readers to supply chain risk management discourse among leaders, practitioners, and vendors alike and how to mitigate it.

Modern Supply Chain Risks

Supply Chain Analytics1.    Supply Risk Management (or Unknown Risk Management)

Supply risks are increasing; businesses face uncertainty in terms of receiving the supplies of raw materials on time, or receiving at all, leading to a huge drop in the customer satisfaction index. These risks cannot be predicted much in advance; and, they cannot be mitigated too; however, they are manageable.

According to cips.org, supply chain disruptions in 2021 rocketed by 88% year-on-year in 2021. The top six disruptions were factory fires, mergers and acquisitions, business sales, factory disruptions, leadership transitions, and supply shortages.

The disruption category that experienced the biggest increase was supply shortages, which rose 452%. Labour disruption surged by 156%, extreme weather climbed by 130% and cyber-attacks increased by 143%.

Though risk assessment helps us identify where our vulnerabilities are so that we may better deal with potential setbacks when they do happen, these factors make it difficult to predict what will happen next in your company's supply chains without a plan. Therefore, a short-term tactical resolution is required to reduce the overall loss.

2.   Supplier Risk Mitigation (or Known Risk Mitigation)

These risks gradually build up over time and can be identified and predicted by looking into historical patterns. It should be handled strategically by changing the mix of suppliers, diversifying the supplier base, or thoughtfully adding/removing a supplier.

According to a survey, a third (34%) of firms have no idea how well their suppliers are functioning. Three quarters (73%) of respondents to the poll cited a lack of evaluation of the situation. The top reasons for not assessing suppliers were a lack of time (37%), lack of software (24%) and not feeling the need to do so (18%)

What is the need for an end-to-end supply chain risk management solution in the market today?

Many solution providers and product innovators have attempted to build a supply chain risk management solution. However, the majority of them are merely risk-sensing systems. Though such solutions might provide insight into the business's risks, most fail to quantify the downstream impact on the revenue and provide no recommendations to minimize the financial impact.

The need of the market is to have a solution that can:

  • Map end-to-end supply chain with all the nth tier suppliers
  • Identify the risks, both long term and short term
  • Evaluate the downstream cross-functional impact on the supply chain
  • Provide AI-based smart recommendations to minimize the impact
  • Provide a collaboration platform to react quickly
  • Provide approval workflow across the hierarchy

Today, it's critical for businesses to be prepared with solid planning to deal with both known and unknown risks. Tredence stands out when it comes to curtailing supply-chain disruptions while capturing the end-to-end value of your supply-chain strategy. Here’s a quick chart of what makes our Supply Chain Risk Management solution complete and unique –

Solution elements

Tredence Solution

Most of other Risk
Management Solution

E2E Supply Chain mapping

?

?

Global risk identification and prediction

?

?

Risk assessment

?

?

Cross-functional downstream impact of risk on supply chain

?

X

Prioritization of risk to be managed - Immediate Vs. Distant, High Vs. Low Impact

?

X

Simulation workbench - AI recommendations to minimize the dollar impact

?

X

Platform to collaborate with various stakeholders and take corrective decisions

?

X

Introducing Tredence Supply Chain Risk Management Solution

  • Real-time data fetch to get factors indicating risk to the business
    • Extreme Weather event history: For all the supplier locations - refreshed monthly
    • Weather Forecast: For the same supplier location- refreshed each week. It captures fields for temperature, rain, snow and wind
    • Port Congestion: For the supplier and receiver ports. It captures about 12 fields per port and is refreshed each week
    • Traffic data: This is massive data fetch exercise. Refreshed weekly for more than a million data points for the route used for commute
    • Social Media data: Download all the tweets, reports, and alerts from the select news handles and articles. It generates more than 200k data points from all the different handles
  • Quantify and qualify the downstream impact on the supply chain:

    • Our solution will effectively link unplanned events like weather disruptions, geo-political instability to potential supply chain network disruptions
    • Eg., heavy storms in Southeast Asia could reduce the capacity of my primary supply base by 60% for three weeks
  •  
    • In planned or unplanned events, this solution provides connected insights into the impact of supply chain disruptions (across areas like transportation, store operations, DC operations, fulfillment, etc.) hence providing a holistic idea of the impact and $ values involved.
    • Eg., 60% risk to my inbounds supplies could lead to
    • Reduction in OTIF by 22% for certain key categories
    • Predicted excess in transportation capacity by 4% and Warehouse labor capacity by 6%
    • Potential revenue loss of $500K

  • Resolution recommendations & Scenario planning:

    • “Cross-functional Scenario planning” helps analyze multiple solution options and choose options with the best all-round performance across the value chain
    • AI-driven recommendation engine helps predict issues and recommends best actions by analyzing various scenario options
    • Eg., What are solution options available to mitigate the situation - Expedite shipments, inter DC shipment transfer, or Alternate suppliers?
    • Scenario planning to run multiple scenarios and determine trade-off analysis
      • Eg., I want to target max service level of only key items, or I want to target a certain OTIF across categories/items
        • Option A: provides overall OTIF of 75% at X USD additional cost | Option B: provides overall OTIF of 90 % at X+Y USD additional cost

Conclusion: The future of the B2B industry lies in intelligent supply chain risk management solutions

The domino effect of the global pandemic and geo-political tensions has already shifted the focus of supply-dependent firms towards building a resilient supply chain network. It needs strategic and tactical makeovers to respond to immediate and long-term risks. As a result, an end-to-end supply chain risk management solution can become a boon to the executives.

For more information on Tredence’s Supply Chain Management solutions, please visit: https://www.tredence.com/services/supply-chain-management

Shubhankit Verma

AUTHOR - FOLLOW
Shubhankit Verma
Senior Manager, Supply Chain Practice

Topic Tags


Img-Reboot

Detailed Case Study

Driving insights democratization for a $15B retailer with an enterprise data strategy

Learn how a Tredence client integrated all its data into a single data lake with our 4-phase migration approach, saving $50K/month! Reach out to us to know more.

Img-Reboot

Detailed Case Study

MIGRATING LEGACY APPLICATIONS TO A MODERN SUPPLY CHAIN PLATFORM FOR A LEADING $15 BILLION WATER, SANITATION, AND INFECTION PREVENTION SOLUTIONS PROVIDER

Learn how a Tredence client integrated all its data into a single data lake with our 4-phase migration approach, saving $50K/month! Reach out to us to know more.


Next Topic

Transformation of Model Factory in the age of AI



Next Topic

Transformation of Model Factory in the age of AI


0
Shares

28163
Reads

Ready to talk?

Join forces with our data science and AI leaders to navigate your toughest challenges.

×
Thank you for a like!

Stay informed and up-to-date with the most recent trends in data science and AI.

Share this article
×

Ready to talk?

Join forces with our data science and AI leaders to navigate your toughest challenges.