10 Supply chain risks, and ways to rmitgate them Just a few years ago, supply chain risk was a behind- the-scenes business term. But today, it has become one of the most talked about topics in the world. For many businesses, it was the pandemic that served as a catalyst — exposing the degree of vulnerability that their supply chains represented. Today, as companies recover from the COVID-related disruptions they endured, their overwhelming priority is to optimise their supply chains. Rather than adding ban get out infront of sk lutions to outdated systems, the best busine smbracing smart, clouc-based supply ch that ca and ope armlessly integrate their supply chains with thei customers and t 10 of the top supply chain risks a discussing the biggest risks they face within thei supaly chain operations ~ and what they should do to mitigate those challenges. \ boardroom in the world, you can hear business Below sa fist of 10 of the leading supply chain risks that are being talked about today 1, Global political unrest ‘The past few years have seen a rise in complex geopoltical challenges which, unsurprisingly.can lead to worldwide sh ergy and raw materials that ha ‘on supply chain production planning andl inthe SAP: unrest was the top supply ording to business leaders (5894) followed by lack of raw rs and establishing lve connectivity wth your allow you to pivot onthe fy in te410 Supply chain rsks, and ways to rmitgate them cenain, they alse suport centralises end-to-end witty ane responsiveness So that cisruptions and upsets in one place don't have to lea to delaysin anotner. 2. Economy and inflation Many ousinesses are feting the pinch as fears of recession inflation, and poor economic conditions mean higher costs ~ of fuel, energy, labour and doing business in general ‘To thrive in times of economic upheaval, supply chains need to be both vsiole and responsive. And asthe latest Gartner research indicates the best supply chain leaders are looking to smart cloud-pased supply chan solutions to help them beat the crunch. These solutions deliver the tools you need such as reabtime cross-business dats analytics and forecasting which can help to sive yous competitive edge. ‘Smart cigtal solutions also deliver powerful planning and predictive tools such as caital twin technology that allows you to virtually recreate your Supply chain, simulating response anc performance across diferent infationelated scenario, Andy Hancock, SAP global vice president ofthe Digital Supply Chain Center of Excellence. adds to this saying: “Wee also pong to see igitalprocess twins, which means modeling_a supply chain to get a complete understanding of ‘he ifferent moving parts to gain visibility ‘And ofcourse, in times of inflation you alse face the risk of sudden pricing spikes or materials shortages. When R&D anc design tears are integrated into your supply chain and manufacturing ecosystems, you can pre-emptively develop akerrate product designs that allow for cases where ‘materials components may have become scarce or unaffordable. ‘Toachieve this levelof visbilty and seamless continuity, modern businesses are turning to planaing software that supplies a network view ofthe entie supply cnain as well as real-time analytics and alerts to help them anticipate and stay ahead of invlation-fueled disruptions. SAP. Integrated Business Planning (IBP) solution for supply chains. supports the simulation and ‘compar'son of citferent supply planning scenarios to power faster and more collaborative ee'sions. 3. Climate-driven disruptions From flooding to heatwaves and wildires, extreme weather events have been happening with alarming anc growing frequency over the past several years, aking a massive tllon supply chains Inthe process. With better visibility nto the supply chain - from the locations of supplier production sites to transport routes - businesses can anticipate and minimise disruptions caused by these natural slisasters, Logistics and transportation management solutions that can support multiple modes of ‘transport and collaboration with global business partners mean faster execution of alternate logistics plans asthe need arises, Mapping and moritoring factories throughout the supply chain and diversifying the supplier base's another useful strategy. In addition to being able to respond to the growing frequency of extreme weather events, you'l also want the ability to rollout green energy and other sustahabiltyiitiatives to mitigate the long-term impact of warming ‘temperatures and also comply with envionment regulations. OF course, these ambitious goals requie powerful solutions that ot only keep up but integrate with your existing business systems and processes. An integrated [BP solution features suoaly chain analytics, what if simulations, alerts, and more te help you stay ahead of unexpected clmete events and imarove sustainabilty and overall eicency, ‘And when t comes tothe bottom ne it's crucial that your supply chain sustainability intatves are trackable and represent good value. A cloud-based manufacturing execution system (MES) is designed to provide a link between production and busines in supply chain management,410 Supply chain rsks, and ways to rmitgate them 4. Non-compliance with ESG and related mandates In response to global climate concerns, we've also seen groting complexity in environmental social and governance (FSG) regulations. And while the are ethically tivated to meet these targets, they are also motivated by the enormous risks ancioss if they con't comply compari ‘Such risks include fines, sanctions, an financial loss that threaten any business Furthermore, non-compliance can result in knock-on operational disruptions including seized inventory. recalls, and eputational damage, To mitigate these challenges, you need powerfultools te track and report on your activities ana partnerships, improving visibility and transparency across your extended supply chain. Sustainability solutions that integra ‘oolorint management solutions make i easir for yout calculate your carbon footprint for products and across your entre value chain, Thisinclues real-time updates of regulations as and actual ESG data can also help. Modern product ‘when they change, and the expedited ability to report your progress as require, Strategies for a resilient supply chain Discover how to holistically manage business rsk aross your supaly chain ee 5, Cyber threats we While the benefits of cloud-connected supply chains are evident, there is also an increased risk associated with the rige in oT networks and connected devices and assets. Such systems can provide additional portals for would-be cybercriminals, so i's wise to choose sot with powerful bll-n cybersecurity features to combat these risks Greater streamlining and collaboration arcund network security, devices, and programmes can help you catch and mitigate these threats. So too can extra investments in employee security training according to 3 2023 report by the Association for Supply Chain management (ASCM),410 Supply chain rsks, and ways to rmitgate thom or years, companies nave been relying on outdated ERP ana supply chain management systems ~ bolting on applications and solutions until they have a mess of code spaghetti and vulnerable access points, Today, youl want to bull your cross-business and supply cnain management systems on 2 powerful, cloug-based ERP system with a scalable in-memory database, Such solutions let you automate your Security noeds in eal lime, and confidently integrate all your cross-business applications into a secure, unified platform 6. Product, and raw materials shortages To help offset shortages causes by volatile supply, nearly two in three companies (64%) are SAP survey. However. other companies ‘which schelon storing mare inventory “justin case" according: lke ZF Friedrichshafen AG are moving to a more holistic demand planning appro: allowed the company"to improve availabilities and reduce inventories" within its mu supply chain ~ and Ive up tots role as arellable provider of innovative technologies for the motive industry When faced with threatened supplies of both raw materials and finished goods. businesses need ‘to develop strong organisational practices to anticinste shortages and prepare contingency plans, They must aso leverage powerful software solutions with integrated features thet canhelp ‘master supply planring, inventory management, nd demand planning, 7. Logistics risks Te past few years have seen many newsworthy shipaing problems including ocean freight lenacks, maritime strikes, and widespread port closures, One of the most notable tisruptions involved one ofthe work's largest container ships blocking the Suez Canal ‘on the global supply chain, week and wreaking hay ininise supoly chain dsruptions, you must adapt your transport modes dynamically, leveraging real-time information. Automated freight management and shipping processes, cloud freight documentation can also help you offset these risks, tandarcss cellaboration, a risks have surfaced asthe res Other lars compete with the Amazons ofthe world. For example, the use feature the most popular SKUs ina small. centrally located centre cary their own unique risks. ‘These include more complex fultiment, the need for more frequent replenish ‘than truckload” (LTL) anc truckload shipment capacity higher start anduncertainty over the longevity ofthis model, There are similar risks when using a multiple istribution centre model. pressure te speed up delivery times and rmicto-ulfiment centres that with more “ess indremate Fortunately the best supoly chain Ingstis software today delvers sophisticated, Al-crven planning features that help you manage you logistics operations more visibly and effciently ~ isticated lat-mile delivery ‘rom warehousing to complex fulfilment, cisribution, and se ‘operations. 8, Demand volatility Product Ifecycles are shorter than ever before. All ttakes isan Instagram of a new product or ‘rend, and consurners expect to be able to buy that item rigt then and tere. To meet increasingly short and complex product ltecyeles, businesses must integrate thei operationsin new an responsive ways. The frst step is to capture trends data from customers and mecla, Those new prodluet and service demands must then be communicated to RED and design teams tasked with ‘the rapid development of new products and product tweaks thet meet those demands, but also, {ollow eficrent and sustainable practices. Then marketing, sales 2 reed to be on board, to create intrest and awareness of new products, and te ensure t pricing. admin, and retallcomponents are being managed efciently as well410 Supply chain rsks, and ways to rmitgate thom ‘recasting for agvanced demand planning anc demanc sensing. Muttievel planning across your entire supply chain network, rough-cut capacity planning that considers material constraints, and automatically priovitzed response management can also help you to smocth out deman: volatily. And when those planning solutions ace integrated with your sales and operational planning (S&OP) teams and tasks, you can serve (and delight) your customers with fast and accurate responses to their wishes and expectations. 9. Lack of transparency ‘Supply chain visbity and supply chain transparency ae two different things. Good visibltys an internalbeneft and means that you have aeal-time, end-to-end view of your operations froma unified platform. Whereas transparencyrefers to an outsce-in view of your company and your abilty or wilingness to expose your practices. For example: the provenance of your products an raw materials, and the ethical standards of your sourcing and labour practices. And thiss where visibility and transparency come back together ina supply chain, Because without end-to-end visibility, full transparency is nearly impossible, ‘Thankully. advances in managing Bie Data artfiialiteligence, and tracing technologies like RFID sensors and blackchain allow for levels of transparency that would have been previously nheard-o, For example, Al can be used to track the status ans lacation of packages. Wit blockchain technology the or gin of product (and its comaonent raw materials) is stored in an irrefutable record that can be updated with new information as it moves throught the supply chain. RFID sensors can be fitted to products and materials, and sensor mendates for your partners end suppliers can shine a light into previously dark areas inthe supply chain. And ‘Beolocation tracking and rule-based predictive alerts can also help you to mitigate these risks. 10. Business information risks The data and information youneed to drive seamless Suppl can come from mary sources including oT networks, product developers, cus partrers, or even other operational areas lke HR or Sales. And it's data is consistent and reliable. Cloud-based, Al-powered digital manufacturing solutions help to ensure that al that valuable datas integrated and standardised to deliver the real-time, dependable intel you need to make informed decisions and respond quickly to ris, ain and manufacturing operations 2, logistics utely essential that this Supply chain risk mitigation strategies The types of risks businesses are facing are evolving, but so are smart clgital technologies that help businesses hone thelr strategies for managing Supp the risk detection, assessment, planning, and execution methods that can help ain risks Here's arecap of some of * Gain better and extended visibly into your value chain and suppliers through cloud sottware that provides analytics anc KPIs for monitoring global and plant level performance ~2s well as machine learning that can perform roolcause analy + Monitor the supply chain in eal time with technologies like Al, machine leaning, advanced analytics, and the IoT for better visibility andreal-time alerts that allow for faster response times, * Quickly ract to changes by reallocating resources and relying on shorter-term contracts + Regionalize soucing using nearshoring, riend-shoring. and integrating knowledge to reduce dependence on global suppliers during times of delays and unrest, + Move to agile planning Uncertainty and keep move saety stock on hand "justin10 Supply chain risks, and ways to rmitgate them tvenchmarks into areas Uk \duct design, materials sourcing, and end-of uct management ~ and using reeyele pasties for 30 pxinting, + Shore up supplier elationships oy diversifying your supplier base and facitating supply chain alanning and collaboration based on standards-based data sharing and cloud software, + Develop risk-based supply chain plans by running simulations, projecting theimpact of factors, Ike der: i planning. and using. analytics to gain insights into all ris Build a risk-resilient supply chain ‘Seehow you can mitigate risks and support sustainability across your business. SAP Insights Newsletter Be ee ee ULE Think of supey chains and sips and perhaps te container vessel Ever Giver, verdged nthe Suez Canal, comes fo mi Enormous sis thet cess he ring [nas ar, efceurs, an important rodeo anspor eget good fom hero there. But how much atertion do we ave ives? We've recent seen foods and Ideas you won't find anywhere else Sign up fora dose of business intelligence delivered straight to your inbox Further reading