Supply chain mapping is vital to minimise impact, says Bindiya Vakil, of Resilinc.
Any halt in production in China for more than two to three weeks will cause a ripple-effect across the globe, the impact of which could be felt for months, warns the risk monitoring specialist.
Bindiya explains: “While there has been some stockpiling by companies in anticipation of further disruption, the relaxation of China’s zero-tolerance Covid policy means that many manufacturers will face labour shortages and ‘self-imposed’ lockdowns as a result of sickness.
“At the moment the spotlight is on large companies such as Apple and now Dell, who recently announced it is phasing out the production of chips in China.
“However, the situation in China and the impact on supply chains should not just be the concern of ‘big business’. The very nature of supply chains being intrinsically linked across the globe and involving organisations of every size from the small to substantial, means that businesses of all sizes need to take action now to strengthen and diversify their supply chains.”
Resilinc has identified key areas of vulnerability where supply chains should be strengthened:
Mapping
To counter any areas of weakness, businesses first need to be able to identify them, so mapping out supply chains down multi-tiers is the first priority. Technology using the latest in AI, cloud and enterprise networks make using software to do this much easier. However, even smaller businesses without the means to call upon these systems can put policies and procedures in place to map and monitor suppliers.
Size up the impact
It’s not just the biggest suppliers who can cause disruption. Businesses typically pay attention only to the top 20% of suppliers, which make up 80% of the spend, but this means a significant risk with zero visibility over your other 80% of suppliers. Unfortunately, some businesses find out the hard way when one of these smaller suppliers gets into trouble that it actually provides a vital clog in their operations.
Safety
Unforeseen events at suppliers’ premises can be hugely disrupting for the businesses which rely on it, so it’s essential to make sure they are operating to the latest health and safety standards and regulations. Recent EventWatch data found that the UK was the sixth most impacted country by factory fires, with 59% caused by faulty equipment and machinery. The impact of this type of event on supply chains should not be underestimated with nearly half of these fires (47%) causing medium to high levels of damage – not to mention loss of revenue while halting production.
ESG
No matter a business’s own commitment to ESG, if its supply chain isn’t clean and clear of labour, safety and/or pollution violations the risk is substantial. In addition to the potential for any misdemeanours negatively impacting your own brand and reputation, a compliance issue or violation at a supplier could be serious enough to cause considerable disruption.
Cyber smarts
According to recent research by industry association Make UK, more than two in five (42%) of UK manufacturers have been victims of cybercrimes in the past year. For example, Resilinc’s EventWatch alerts were up by 90% in the first half of 2022 compared to the previous year, and the cyber risk to supply chain continuity shows no signs of slowing. Most businesses carry out some degree of IT security due diligence prior to taking a supplier on. However, as threats become increasingly sophisticated, more businesses are putting in place ongoing measurement of suppliers’ cyber security practices as an extension of their own cyber security planning
