Risk management is at the top of the agenda for every responsible business in the 2020s. Risks can come from diverse angles, and usually, the ones that hit hardest and for which businesses are least prepared are those that originate outside the business.
Supply chain risks are a case in point. From inventory shortages due to natural disasters to financial exposure to quality issues, a supply chain sometimes has the appearance of a sequence of disasters just waiting to happen.
It is something that has attracted attention at the very highest levels. In February 2021, President Biden issued an Executive Order on America’s Supply Chains. Little surprise, then, that in a subsequent survey by Gartner, 90 percent of businesses indicated an intention to make their supply chains more resilient by investing in appropriate technology.
Leveraging risk management technology
Managing risk is a four-stage cyclic process of Monitor, Analyze, Mitigate, Learn. Traditionally, risk management software has helped to identify, assess and mitigate business risks, but typically with a static focus. Some might look at financial performance, others at compliance indicators and so on.
Koray Köse from Gartner observes that this can lead to a lop-sided approach with some vulnerabilities closely managed and others flying straight under the radar. He says businesses are now using risk management software to get a better handle on their supply chain risks by implementing the four-prong approach mentioned above. Specifically, it looks like this:
- Monitor – provide visibility into risk events by using dashboards, alerts, maps, reports and notifications
- Analyze – measure the potential impact on suppliers and generate an impact summary
- Mitigate – outline mitigation strategies using action plans, workflow diagrams and recommendations
- Learn – apply AI / machine learning in order to fine-tune and continuously improve future recommendations along with the corresponding impact analysis
Fragmented solutions are coming together
Risk and supply chains are two beasts that are multi-faceted, and bringing them together simply increases the potential strands exponentially. Even by taking the above approach, it is necessary to apply it separately across different areas.
For example, many businesses that are reliant on supplies being shipped from points across the globe invest in event monitoring to be aware of potential weather events such as hurricanes or earthquakes.
Others pay close attention to the businesses themselves, in terms of background checks, due diligence and monitoring the financial health of strategic partners.
Others have developed software solutions that run deeper, examining capacity risk, cybersecurity, performance management, compliance risk and the like.
Right now, there is no single solution that can address the entire range of supply chain risks. However, vendors are developing APIs that can integrate different systems that address specific vulnerabilities.
Mr Kose commented: “At this point, the solutions market is so fragmented that while some solutions are very good in one or few use cases, there’s really no single, comprehensive solution.”
Developers taking up the gauntlet
To software developers, Mr Kose’s words sound very much like a challenge. The situation is evolving rapidly. Software developers like Coupa, Ariba, Everbridge and JAGGAER are investing heavily in broad rush supply chain risk management solutions.
As one of the largest logistics companies on the planet, DHL knows more than most about supply chains. The recent convergence of its Resilience360 and Riskpulse into a new solution called Everstream Analytics serves as an interesting case study and demonstrates how vendors are pushing this area of risk management to the forefront of their software solutions.
Looking to the future
The only certainty in risk management is uncertainty, and supply chain risks can crop up at any time and place. Businesses are investing more heavily than ever before in technology to help them understand, manage and mitigate these risks.
William Brooks of Capgemini describes this as “a software sector where necessity is the mother of invention” and notes that any new issue that arises represents an opportunity for a risk management solution to help address it. Momentum is rising, and it will be intriguing to see the solutions that arise over the next two to five years as collaborative risk management across supply chains becomes the norm.
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