Posted on 28 Apr, 2016 by Neil Sharp
Your supply chain powers your manufacturing operation. Successfully managing the flow of components and materials is the key to ensuring that you can produce the high-quality products that your customers expect and deliver them on time and in full.
In a globalised world that faces ongoing instability across different quarters, creating a responsible, sustainable and lean supply chain has become increasingly important. In this environment, maintaining excellence is dependent on effectively dealing with potential problems.
It’s important to keep your eye on both short-term and long-term threats, in order to safeguard your source of materials. From man-made and natural disasters, to industry regulation, and cyber threats, there is a host of issues to contend with. Any gaps or weaknesses in your supply chain are likely to have a domino effect that could have profoundly negative consequences for your organisation.In this post, we will consider some of the most common risks to your supply chain and how you can face them head-on – and overcome them.
Preparing for the expected and the unforeseen
Big events happen on a regular basis: sometimes, you can plan ahead; other times, you can’t. Either way, it’s vital to have a contingency plan in place.
Unanticipated and awful occurrences, such as wars and natural disasters, can cause chaos to your supply chain. Depending on the specific circumstances, you may have far more pressing concerns than where you’re getting your next batch of materials from – nevertheless, it’s worth knowing how you might react. Additionally, sharp rises in the price of commodities like oil and copper can have an adverse effect on the price of components. And even anticipated events, like Chinese New Year, Thanksgiving and Christmas, can cause disruption to production schedules if you haven’t thought ahead.
Rather than waiting for problems to land on your plate, it’s important to keep your ears to the ground and ensure that you have accurate and consistent access to market intelligence, to mitigate against adverse circumstances. It’s a good idea to spend some time talking to your suppliers about their own contingency plans and emergency procedures, to make sure these are up to standard.
Meeting industry regulation
Governments, consumers and companies now take a keen interest in the provenance of their goods. Increasingly, these parties are demanding assurances from suppliers that the products they produce are manufactured safely, ethically and in an environmentally sustainable manner.
There are a number of EU directives that govern the manufacturing and engineering sector. For instance, in 2007 the EU Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) was enforced to "ensure a high level of protection of human health and the environment from the risks that can be posed by chemicals, the promotion of alternative test methods, the free circulation of substances on the internal market and enhancing competitiveness and innovation".
And in January 2013, the Restriction of the Use of Certain Hazardous Substances (RoHS) in Electrical and Electronic Equipment (EEE) Directive was transposed into UK law. This prohibits the placing on the EU market of products containing more than the agreed levels of the following substances: lead (Pb), cadmium (Cd), mercury (Hg), hexavalent chromium (Cr6+), polybrominated biphenyls (PBB) and polybrominated diphenyl ethers (PBDE).
Currently, the EU is proposing to introduce a law that makes it mandatory for EU importers of tin, tantalum, tungsten and gold for manufacturing consumer goods to be certified, in order to ensure that they do not fuel conflicts and human rights abuses in conflict areas.
Additionally, in the UK, the Modern Slavery Act now includes a section called "Transparency in Supply Chains". Since October 2015, all companies with a turnover of greater than £36m, that trade in the UK, have been required to show, in their existing disclosures, their efforts in identifying and analysing the risks of human trafficking and slavery in the supply chain.
It’s imperative that you keep abreast of industry legislation and work with suppliers that do the same. These rules are constantly amended and updated so you can’t afford to let your focus in this area lapse.
Warding off cyber threats
Advances in technology have brought many benefits to the manufacturing sector – for example, Industrie 4.0 – but they have introduced threats too. The relationships you have with your suppliers are symbiotic and masses of data and confidential information are shared between you.
Therefore, it’s crucial to ensure that your systems can’t be infiltrated. Whether hackers steal new product ideas, disrupt your day-to-day processes, or steal money from your organisation, the threats are real.
Take a look at your own internal systems. Do you have secure IT systems? Are passwords and log-ins secure? Do you use multi-factor authentication for important programs? If the answer to any of these questions is no, it's time to review your processes. It’s also vital to assess your supplier’s practices.
Writing on Supply Chain [Quarterly], Drew Smith says: "Vendor security begins with two fundamental pieces of knowledge. The first is which firms comprise your company's supply chain. Identifying all partners, affiliates, and network participants is critical, as a firm is only as strong as its weakest link. The second is the degree to which your company is reliant on each of its product and service partners. Your company's security is dependent on identifying the extent of that reliance, particularly relative to the size and scope of the business operations. A security breach at a supplier that plays an integral role in, for example, product design would be a much greater threat than a security breach at a supplier with which a company has a simple, transactional relationship."
The relationship you have with your suppliers is one of interdependency - if they have significant gaps in their armour, it is unlikely that you will be protected.
As you can see, your supply chain faces threats from numerous directions. While this may seem daunting, awareness and preparation are the best defences against these dangers. Most risks can be mitigated against by asking the right questions and putting the correct contingency plans in place.
For more information about creating a responsible, sustainable and lean supply chain, why not download our eBook below. And please feel free to get in touch if you have any questions.
Topics: Supply Chain