“The days of playing at resilience are gone, it’s no longer a choice, it’s essential.”
KY3P
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By Richard Blore (CEO of KY3P, S&P Global) and Simon Chard (Head of Business Development of KY3P, S&P Global) of threat and four tools for better resilience The next vector
Two key factors challenge an organisation’s resilience and make its systems, processes, and supply chains fragile: the number of external interconnections and the speed required to react when something falters. Globalisation and increased digitisation are tightening these chains, which could present perils, and cyber security is now a significant focus. Yet technology can also be used to guard against risk. Covid taught us that organisations with resilient supply chains had a competitive advantage. Those with access to information about who their suppliers were and where they were, as well as potential alternative sources, could implement business continuity plans on Day One. In contrast, others spent weeks trying to find this out. Ten years ago, spreadsheets could handle what little data was available; nowadays, organisations are overwhelmed with information. They need assistance to gather and harness this intelligence so that they may convert it into meaningful decisions that can help boost supply chain resilience. Prevention and cure Many companies seeking to identify and segment their suppliers – to help manage them – do so using a pyramid methodology. They typically group those with whom they spend the most at the top. Some will also consider those that could present a risk and group them at the peak. There are, however, often much smaller suppliers who could be vital yet slip below the radar for supplier management. This tends to happen because what these smaller suppliers provide has not been captured correctly by businesses that continue to operate in functional silos. Solving the challenge of supply chain transparency requires a trio of elements well known to procurement professionals: the combination of people, process, and technology.
The arsenal of solutions offered by providers includes more robust and thorough data; on-site supplier assessments; an IT platform that provides a workflow of information and alerts to potentially flag issues; and the talent to analyse the output of all these. Let’s explore four tools for better resilience. 1. Data: Every day, more and better information becomes available, enabling you to judge the financial stability, cyber security, environmental performance, and more of the suppliers you work – or are considering – working with. Procurement departments are increasingly accessing and getting better at using this data to identify changes and risks and to put back- ups in place. 2. Supplier assessments: Providers can offer intensive on-site evaluations in addition to collecting, compiling and analysing publicly available information and carrying out remote evaluations on thousands of suppliers. These consist of intrusive visits of around two to three weeks, examining policies, processes, and validated data in person. Reports are then typically made available to all customers. This utility model provides scale and efficiency to all, and demand for it is increasing. 3. Platform: This is technology to support supplier management. It provides a workflow of information about suppliers across different risk domains. Everything is brought together into a dashboard that can instantly generate reports, test scenarios, detect changes and assess potential impacts. It ultimately saves teams’ time and money sourcing and sorting such information for themselves. For instance, when Russia invaded Ukraine, those with systems in place could immediately use them to model the impact.
4. Talent: There is a severe shortage of individuals with expertise in supply chain risk. External providers have highly experienced professionals who can analyse risks and understand their relationships. We advise that companies let others interpret this information while focusing on their area of expertise: how to respond to it. Informed decisions Until this point, many procurement functions have focused on improving internal processes, disciplines, and ways of working and are now better able to put this information to use. A failure at some point is inevitable. Resilience is how well you can hold off problems or react to them. Knowing who your suppliers are, and whom you need to work most with closely, enables you to consider ‘what if?’ scenarios and plan for them. It also enables you to focus your supplier management efforts where you will benefit most. The days of playing at resilience are gone; it’s no longer a choice. It’s essential. Without adequate resilience, investor confidence and the ultimate value of your organisation will be damaged. So ensure you arm yourself with the tools and information you need to judge which suppliers you choose and how to work with them.
Macro Risks
• Increased digitisation • Globalisation • Recession • Geo-political impacts • Inflation • Pandemics • Reduced cashflow and capital • Cyber security
Armed with supplier information and assessments, tools and analytics, procurement professionals can improve supply chain transparency and help to counter risks
Image reproduced with permission of S&P Global
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