It is interesting to poll a large audience to see who has a supply chain risk strategy. It’s no surprise that all the hands go up indicating that a supply risk strategy exists and even more interesting to see most of the hands go down when asked how many companies go beyond tier 1 suppliers. The surprising fact is that we do a great deal of due diligence when selecting the suppliers, but the reality is that the risk does not always exist at the direct supplier level. A few weeks ago, I was working in the computer industry with a client who had just mapped the supply chain only to find that all the suppliers had a common source on a component three levels downstream in the supply chain. Without this knowledge, the client and industry had an extreme source of undocumented risk. I’ve heard all excuses for the inability to map supply chain and excuses range from our supplier will provide that data, supplier say there supply chains proprietary, we don’t have the manpower, and it’s difficult.
I recently started working on a project to develop programs for forced and child labor in the supply chain and, based on my research, many industries and companies have extreme exposure to reputation risk. Thinking back to my experience with commodities and food ingredients, apparel, fishing and mineral categories, there should have been a detailed audit of the supply lines. I used this experience when I coauthored the book “Transform your Supply Chain: Releasing Value in Business” in 1998, which is all about preparing for the changes in supply chain and includes a detailed audit to help companies audit the chain. I update the surveys in that process continually, which now include corporate social responsibility, cybersecurity and a shared responsibility across the supply chain that wasn’t a concern 20 years ago.
I think it’s time to get serious about mapping and auditing the supply chain. No longer can we tolerate a supply base that does not feel the need for mitigation of supply and reputation risk across the supply chain. Here’s a simple process to follow:
Much of the mapping can be developed in the survey. It’s essential to identify critical supply links and assure that there are no issues in the downstream supply. While I understand the constraints of manpower and budgets, the cost will be a fraction of the cost in having a significant supply loss or damaged reputation from a social issue.
Can you afford not to map and audit your supply chain?