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Supply chain risk management will be key in the months ahead

Risk Management

James Tucker

Threats to supply chains are nothing new. From cyber-attacks and floods to earthquakes and IT outages but now there are new threats on the horizon – that of trade wars, protectionism and tariffs. Consequently, according to a recent supply chain strategies report in The Times, the emphasis on risk management is going to sharply increase in the months ahead – and the approach will have to be a proactive one - businesses will not be able to afford to simply take a ‘wait and see’ stance.

US- China trade war?

The report points out that while the US administration is moving cautiously, in a bid to avoid US job losses among US manufacturers, it has already announced emergency tariffs against the import of some white goods and solar panels while tarrifs on steel and aluminium are also being considered. With a gap of $375 billion between Chinese imports to the US and US imports to China and the possibility of more aggressive US measures, it is unlikely that there wouldn’t be some form of retaliation from China. When the Obama administration imposed tarrifs on tyres from China in 2009, China in return, imposed tariffs on US imports of chickens and car parts. If a trade war does escalate then it is inevitable that other countries – Germany, Japan and South Korea, for example will become involved.

Supply chain visibility

However, according to The Business Continuity Institute 69% of companies do not have full visibility over their supply chains – a worrying statistic when today’s supply chains are now so interconnected and production is split into so many different stages that the impact, of a US-China trade war, for example, would be felt around the world.  If there is a wider trade war then it will be vital to know not just who your suppliers are – but also your suppliers’ suppliers.  Up to the minute intelligence on the geo-political situation will also be important so that you can react quickly to trade wars and understand which suppliers are likely to be affected. While the report points out that some companies are investing in supply chain resilience, many still have room for improvement pointing out that while companies may have a good understanding of their tire one suppliers, this was not necessarily the case lower down the chain.

Skills for emerging threats

Consequently, the skills needed by today’s procurement and supply chain professionals will include robust risk management as well as the agility to avoid dependence on sole suppliers. The savvy organisations are now using technology to monitor news sources as well as the ongoing analysis of data-sets in order to try and identify potential supplier problems before they become actual problems.  Collaboration with other organisations is also key so that intelligence can be shared about potential supplier failure.

Have you got the right skills to deal with these emerging threats in your organisation? Take a look how we have helped organisations build world class procurement and supply chain functions or if you are seeking a new challenge, visit our jobs page