Against a background of increasing geopolitical and cyber-related risks we are seeing an ongoing shift in supply chain development with far greater emphasis being placed on resilience. Companies are under pressure to build more resilient supply chains and to do that they need better visibility into their supplier networks.
Over the last few years the potential risk of supply chain disruption has steadily increased for most companies. The impact of Covid-19, the rising frequency of cyber attacks as well as ongoing geopolitical tensions are some of the factors threatening global supply chains.
At the same time shareholders and other stakeholder groups are demanding that companies place increasing emphasis on social accountability and environmental issues. As a result management teams are under pressure to develop supply chains which are both resilient and responsible. So there is already a clear trend towards developing supply chains which are designed to be resilient rather than simply least-cost. Building in resilience means companies are more likely to consider dual (or multiple) sourcing of key materials and critical components and also more likely to avoid suppliers that consistently underperform against a range of ESG measures.
Visibility and resilience go hand in hand. Without 360 degree visibility of their supplier networks it is far harder for companies to understand which particular events might lead to disruption and what the likely impact might be. Supplier transparency is key. If a company can see and map its supplier relationships and interconnectivity down to the second, third and fourth tiers it will be in a better position to absorb and avoid disruption.
Inevitably the shift towards greater supply chain resilience is partly a function of technological change. We are probably reaching the stage where using some sort of online platform (i.e. a virtual ‘digital twin’ of the supply chain) to map and monitor supplier relationships becomes the norm. If only from a risk reporting and compliance perspective it is becoming almost impossible to track and monitor critical supplier relationships without access to such a tool.