Companies looking to protect their global supply chain face an increasing number of challenges. RS’s Charlie Jenkinson reveals the biggest risks and explains how working with the right supplier can help businesses to avoid them
Supply chain risk is an incredibly important area of business – this is because most companies have global supply chains that they rely on to transport products to and from other parts of the world. In general, the larger an organisation the more reliant it will be on a global network at some stage in its supply chain.
The ever-growing use of technology and data, along with the way that distribution has globalised, has increased the potential risks around supply chains. Getting on the wrong side of compliance, or being affected by an expected event that affects productivity, can have a huge impact on a business’s profitability, the service it provides to its customers and its reputation.
"Getting on the wrong side of compliance can have a huge impact on a business’s profitability, service to customers and its reputation "Charlie Jenkinson, Vice President of Operational Excellence, RS
There are two main types of risk relating to your supply chain – those caused by external factors that you can’t control or predict, and those that can be controlled and need to be managed through a good risk strategy and practices.
Unpredictable risks are the big natural events that disrupt the supply chain – recent examples being the Eyjafjallajökull volcano in Iceland and the tsunamis in Thailand and Japan. These types of events can have significant knock-on effects to the supply chain. For example, the 2011 floods in Thailand shut down many of the factories making the world’s hard disk drives. The result was a massive global shortage, which had a huge impact on the price of individual units.
There is also the threat of terrorism and political change, where new regimes may change or amend the rules of trade agreements – the UK is about to face this following the vote to leave the EU.
The key to reducing these risks is being prepared. Clearly, you can’t predict natural or terrorist disasters, and while political change can sometimes be predicted, the exact impact is hard to foresee. As such, it’s important to have a disaster plan in place and to look at where you stock key products (or where your supplier stocks key products), so that an unforeseen or ‘black swan’ event doesn’t cause too much disruption to your business.
"With the right supplier in place, it’s possible to pass all of the headaches around your global supply chain to a trusted third party and focus on your core business "Charlie Jenkinson, Vice President of Operational Excellence, RS
In order to make these decisions it’s essential to have visibility of your complete end-to-end supply chain. That way, you know where all products are at all times and can proactively plan to stock critical parts in particular locations. One way of ensuring that this happens is to work with a global distributor that can hold stock on your behalf so that the risk of disruption is removed.
At RS, we are able to assist customers in both these areas – firstly by helping to provide that end-to-end visibility via our data, and secondly, through our global network, which means that we can ship stock to customers from a wide variety of different locations.
When it comes to risks that can be controlled by a business, the biggest factor to consider is compliance. Transporting products across borders is a minefield of legislation and compliance rules that need to be adhered to. Compliance breaks down into these areas:
This focuses on where is it legal to sell and use a product – in Europe; people know that everything has to be CE marked, for example. But what are the regulations in Japan or Brazil? It’s essential that all items meet regulations to avoid potential fines.
Are you looking to ship to a country or recipient on a denied parties list, or are your products ‘dual use’ (where they could have a military use), which requires additional checks and documentation?
This boils down to finding the most efficient, legal way of delivering products to the end user. Some products cannot be sent by air (such as lithium batteries) while others have to packaged in a specific way. These regulations also change constantly.
Such is the complexity involved in meeting these compliance rules that it makes sense to work with a trusted supplier to handle the packaging, documentation and transport of products. The key factors in choosing the right supplier are that it has a global network with high stock levels; reliable delivery standards that will meet your needs; and the knowledge to deliver to any country you operate in in a fully compliant way. With the right supplier in place, it’s possible to pass all of the headaches around your global supply chain to a trusted third party and simply focus on your core business.