New risk management practices needed to safeguard transport and supply chain networks, report warns

The report, New Models for Addressing Supply Chain and Transport Risks, produced in collaboration with Accenture, highlighted what is described as the ‘urgent’ need to review risk management practices to keep pace with rapidly changing contingencies that face the supply chain, transport, aviation and travel sectors. US Homeland Security Secretary Janet Napolitano reinforced the report’s warning during the meeting. “We must continue to strengthen global supply chains to ensure that they operate effectively in times of crisis, recover quickly from disruptions, and facilitate international trade and travel,” she said.hide“As part of this effort, we look forward to working closely with our international partners in the public and private sector to build a more secure and resilient global supply chain,” added Ms Napolitano. Trends such as globalisation, lean processes, mass travel and the geographical concentration of production have made supply chain and transport networks more efficient, but have also changed their risk profile, said the WEF report. Disruptions in the past five years – including the global financial crisis, the Yemen parcel bomb scare, flooding in Thailand and the Japanese earthquake and tsunami last year—have highlighted how risks outside the control of individual organisations can have unintended consequences that cannot be mitigated by one organisation alone, stated the Geneva-based business group. “Encouragingly, more than 90% of those surveyed by the World Economic Forum and Accenture initiative indicate that supply chain and transport risk management has become a greater priority in their organization over the past five years,” stated the WEF. “General uncertainty in the global economy and the increasing sophistication of supply chains naturally breeds concern around network efficiency and vulnerability,” said Frank Appel, Chief Executive Officer, Deutsche Post DHL. “Our industries are working through the World Economic Forum’s Supply Chain & Transport Risk Initiative to understand and improve systemic resilience, for the benefit of business and society,” he added. “The World Economic Forum has identified opportunities for improving risk mitigation and building resilience across networks,” said Elaine Dezenski, Senior Director, Risk Response Network, of the WEF. “Global supply chain and transport networks form the backbone of the global economy, and the report is a call to action for the international community—business and government—to continue improving coordination and collaboration in order to effectively address these risks,” she added. The report is based on input from executives participating in the Forum’s Industry Partnership programmes in the automotive, aviation and logistics sectors, and an interview series and survey that involved some of the world’s leading academic, industry and government experts. It identified the most significant threats to supply chains and transport networks as natural disasters, conflict and political unrest, sudden demand shocks, export/import restrictions and terrorism. The report also highlighted the vulnerabilities undermining the resilience of networks: reliance on oil, availability of shared information, fragmentation of value chains, extensive subcontracting and lack of supplier visibility. And the report identified risk management priorities that the WEF believes require further development. These tools need to be integrated into the broader strategic framework of organisations and include collaborative and trusted networks, effective risk legislation and incentivisation, appropriate data and information sharing, improved quantification metrics and enhanced scenario planning. CEOs meeting at the Annual Meeting in Davos discussed five key recommendations for business and governments to enhance risk understanding and management, stated the WEF. These recommendations included: improved international and inter-agency compatibility of resilience standards and programmes; explicit assessment of supply chain and transport risks as part of procurement, management and governance processes; the development of trusted networks of suppliers, customers, competitors and governments focused on risk management; the improvement of network risk visibility through two-way information sharing and collaborative development of standardised risk assessment and quantification tools; and improvement of pre- and post-event communication on systemic disruptions. The WEF report can be found at http://www.weforum.org/SupplyChainReport

New risk management practices needed to safeguard transport and supply chain networks, report warns

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