Technology and ‘glass silos’ can help tackle inadequate supply chain risk management

Many companies are failing to adequately manage supply chain risk because various functions are still too often working in silos and not making use of technological solutions, according to expert speakers at Commercial Risk’s latest conference. There remains the need to get further board buy-in to help drive enterprise-wide supply chain risk management and deliver a proactive rather than reactive response, they said. Speaking at our Supply Chain Risk Management conference in London, Heiko Schwarz, founder and managing director of supply chain risk management specialist riskmethods, said companies are failing to provide visibility on tier one suppliers, let alone those further down the chain. “What companies often do when they start business with suppliers is carry out a single credit rating check, get some certificates to understand the quality management systems of their suppliers and maybe once a year they do a performance review. This is not risk management. This is so far away from proper risk monitoring of tier one suppliers,” he said. “I am not saying sub-tier risk management is not important, but starting with the real pain points is a pragmatic approach,” added Mr Schwarz. Fellow speaker Rachel Elliott, head of thought leadership at the Business Continuity Institute (BCI), pointed to the latest supply chain survey by her organisation, which found that only 25% of companies coordinate reporting on this issue across the whole enterprise, with too many companies still working in silos. Ms Elliott said these numbers are “disappointing” and there remains “quite a lot of work to be done” to build cross-organisational resilience. She added that companies need to break down departmental silos and, at the very least, work towards what she described as “futuristic glass silos”. “People get very siloed in what they are doing and think people don’t want to know what is going on in other departments, which can be very specialised. A lot of what departments do should still remain in those silos – people don’t need to know everything. But I think there should be more glass silos, where others can see what is going on but don’t necessarily have to be able to grab that knowledge,” said Ms Elliott. She said it is the board’s job to push interest in supply chain risk management and noted a trend towards chief resilience officers in large organisations, who can tackle the issue at board level and cascade it down through the enterprise. “If you can get some kind of visibility at board level, it is good. The more attention at that level, the less siloed the approach, or at least you will get more modern-looking, futuristic glass silos,” said Ms Elliott at the event, which was supported by the BCI, Airmic and the Institute of Risk Management. Nick Wildgoose, director at Supplien Consultancy, said top management support for supply chain risk management is vital, but so too is ensuring departmental objectives are aligned. “Procurement’s main objective is taking costs down. If that is how you are being rewarded, is it going to be more than lip service that you pay to other functions? Objectives need to be aligned and, unfortunately for many corporates, they are still not aligned,” he told delegates at the conference sponsored by AXA, Belfor, Clyde & Co, the Supply Chain Risk Management Consortium, Verisk and Zurich. Fellow speaker Kamban Parasuraman, principal engineer-manager at Verisk, said companies are tending to react after a supply chain event hits, rather than taking a proactive approach. “We are not there yet when it comes to proactive risk management. We need to address this and technology provides a good opportunity to do so,” said Mr Parasuraman. He added that not many companies are getting visibility beyond tier one and two suppliers because of a lack of data. There are lots of ongoing modelling and technological developments to fill this data gap, which “needs to be bridged," he continued. Mr Schwarz said he is “amazed” by the findings of the recent BCI survey, which revealed six out of ten companies are not using technology to manage supply chain risk. Many companies are being left behind on technology, which can help continuously monitor the health of supply chain networks 24/7, he added. Mr Wildgoose agreed that the solution to supply chain risk management requires better use of growing technological solutions. “How are you going to cover your strategic suppliers without some kind of technology solution? How are you going to start that collaboration between the glass silos without some kind of common tool?” he asked. Mr Wildgoose said lack of awareness about appropriate supply chain risk management tools and different appetites for investment in technology are key reasons for the lack of take-up. But he asked why brokers and insurers are not giving clients more access to some of the tools now available. Speakers at the event also advised buyers to use a blend of parametric insurance cover and more traditional indemnity policies to transfer supply chain risk, with one arguing it is now the right time to push the boundaries of insurability and devise solutions that are not based on named perils.

Technology and ‘glass silos’ can help tackle inadequate supply chain risk management

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