Technology evolution key to managing global supply chain risk

October 01, 2019 by Mark Dunn

As international trade becomes ever more complex, so does the risk facing firms doing business around the world.  With more companies' businesses moving through geographic borders, time zones, and jurisdictions, technology is becoming ever more vital in navigating the risks presented by vast, multi-layered supply chains.

A tougher, no nonsense approach

A tougher regulatory environment means that businesses are facing expanding compliance obligations when it comes to knowing their suppliers.  The supply chains of many big businesses often stretch into jurisdictions with cheaper tax regimes, less red tape, reduced regulation, or cheaper labour. The US, EU and UK are all increasingly placing the responsibility for the behaviour of suppliers, regardless of distance, on what they see as the organisation at the top of the tree.

Harnessing technology to mitigate supply chain risk

The traditional approach to monitoring and tracking the knowledge of suppliers is now very last century: a combination of spreadsheet software and the knowledge of local staff on the ground.  Companies relying on such primitive methods to protect their reputations from the behaviour of their suppliers and to stay within compliance and regulatory boundaries are putting themselves at almost as much risk as those that do nothing.

There have been several notable and high profile cases of supplier failure damaging large western brands in recent years:

  • The tech giant Apple faced a torrent of negative publicity and a social media backlash in 2010 when it was revealed there had been 14 worker suicides at its largest supplier, Foxconn, in China.  Further reputational damage followed in 2015 when workers at Foxconn were filmed falling asleep on the job.
  • British retailers including Primark were forced to pay out millions of pounds in compensation to the families of workers killed in the collapse of a building used by one of its suppliers in Bangladesh in 2013.  The firm faced a media firestorm when it was revealed that the building in which 1,100 people died or were injured had been poorly constructed and was overcrowded.

With the supply chains of the biggest corporations sometimes stretching into the hundreds of thousands, only sophisticated batch screening technology stands any chance of collecting, managing and analysing the huge amount of data available for businesses to leverage.  In this area, knowledge is power, and the most astute firms are mining huge amounts of data from the deepest parts of their supply chains to use in risk management and compliance.

The future compliance professional

The most sophisticated technologies now mine and track supplier data – huge steps when it comes to mitigating supply side risk – collating this data in a structured form to be harnessed for compliance decisions.  Among the most sophisticated are applications which can provide firms with a suite of datasets including advanced analytics, business intelligence, data management and predictive capabilities.

Further technologies include radio-frequency identification (RFID) chips which can be embedded in products or packaging and warn of failures in the supply chain in advance and enable astute firms to take evasive action.  Compliance is a growing profession, and moving forwards compliance professionals will be drawing skills from data science, IT and statistics.

Third party screening

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