Coping with the Convergence of Complexity
Early on, we discovered that transparency would become key for multinationals seeking new suppliers. This observation was made more relevant in 2019 when HSBC surveyed 8,500 companies in 34 markets to produce its “Navigator” white paper.
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Titled Now, Next and How for Business, HSBC’s study found that a third of companies are planning to improve the sustainability of their supply chains, and researchers expect that digitization will play an increasingly vital role.
In a subsequent column, we noted that new evidence surfaced in 2019 that suggests that transparency can also circumvent human rights abuses…even slavery.
According to The Monitor Institute by Deloitte, private sector companies and public sector associations are investing in new tools and solutions to enable them to better oversee their supply chain practices and protect vulnerable workers, while protecting their reputations.
Responsible Supply Chain Tools: Understanding the Market Opportunity estimates that the market size could optimistically grow to between $889 million and $2.7 billion over the next five years as companies explore, implement, and scale a range of solutions while developers continue to create new tools.
Furthermore, analysts maintain that today’s global supply chains are incredibly complex and opaque, but many companies are investing in new tools and solutions that enable them to better oversee their supply chain practices and protect vulnerable workers. These tools are helping companies assess risk, diagnose problems, engage workers, and monitor labor practices – effectively reducing that opacity.
Mitigating Risk
Creating supply chain transparency is not without its risks, however. A much broader view on shipping and sourcing vulnerability has been outlined in two new studies that also provide transactional tips on mitigation. Resilence360 – a supply chain risk management company – issued its first annual report containing a summary of current threats including international trade tensions and the growing impact of climate change.
“The supply chain risk environment is dynamic and continually evolving,” says Tobias Larsson, chief executive officer, Resilience 360. According to its Top 10 Supply Chain Risks checklist, the exercise can be daunting.
Number One on the list is the threat of trade wars which may require massive restructuring of manufacturing networks. Analysts also note that global trade tensions have already led to the imposition of new import tariffs on a wide range of consumer products and industrial components.
Meanwhile, public discourse following the migration influx to Western Europe and ongoing high-profile migrant caravans traveling to the United States has increased many countries’ focus on physical border security. At the same time, some cargo is being caught up in industrial unrest. Strikes, overtime bans, or work-to-rule can affect any transport mode almost anywhere in the world.
As we enter 2020, keeping track of ongoing risk and potential new ones will be the focus of Resilinc – a San Francisco Bay Area-based technology company which has for past ten years issued its EventWatch Report.
Throughout last year, EventWatch issued a total of 2,629 event alerts—more than seven per day, on average, and an increase of 36% year over year. Of these, the firm classified 907 events as those affecting its customers’ mapped supplier sites, and therefore requiring an impact assessment. Across the globe, this event data showed that 21,152 suppliers and 58,191 supplier sites producing 552,950 parts across multiple tiers in the supply chain were potentially affected.
Humanitarian Concerns
When the Global Impact Sourcing Challenge was launched at this time last year, the goal of creating jobs for those most in need through the power of procurement and global supply chains was the main objective. According to the Global Impact Sourcing Coalition, (GISC) businesses will be “stepping up” in 2020.
While it is almost a given that a company’s procurement decisions can contribute to poverty alleviation and inclusive growth around the world, a new group is actually doing something about it.
The Global Impact Sourcing Challenge is the first business network to specifically focus on escalating impact sourcing as a way to increase employment and career development opportunities for disadvantaged workers. It is seen as the largest official commitment to “Sustainable Development Goals” outlined by the United Nations, as it places its main focus on inclusive job creation.
“It is a great example of collaboration,” says Tim Hopper, Responsible Sourcing Manager at Microsoft. “Through intentionally choosing impact sourcing, and increasing the number of impact worker jobs, companies are able to create social benefits on top of generating business value.”
According to the UN, roughly half the world’s population still lives on the equivalent of about $2 a day with global unemployment rates of 5.7% and having a job doesn’t guarantee the ability to escape from poverty in many places. This slow and uneven progress requires multinationals to rethink and retool their economic and social policies aimed at eradicating poverty.
As a final Global Links prediction, we maintain that this convergence of complexity will require new uses for human capital with a greater concentration on humanitarian supply chains.
Kathy Fulton, the Executive Director of American Logistics Aid Network (ALAN), noted at last year’s USC’s 7th Annual Global Supply Chain Excellence Summit that obtaining “actionable information” into the hands of the small and medium sized supply chain services providers is key.
“This is especially true for those who don’t have time or resources to manage a full disaster or humanitarian response program,” she added. “We recently launched our portal with information that can both help those businesses better prepare. It also provides a snapshot for managers to quickly reach organizations empowered with direct disaster action.”
Susy Schöneberg, head of Flexport.org, agreed that partnerships will be become increasingly important in this arena. Her company now works with the non-profit charity, MedShare, to recycle medical supplies and equipment.
“We know that we can’t solve humanity’s biggest challenges by ourselves, which is why we believe in partnerships,” she concluded. “At the same time, we also invest in infrastructure and warehousing. But the key emphasis will always be on human interactions and expertise.”
About the Author
Patrick Burnson, Executive Editor Mr. Burnson is a widely-published writer and editor specializing in international trade, global logistics, and supply chain management. He is based in San Francisco, where he provides a Pacific Rim perspective on industry trends and forecasts. He may be reached at his downtown office: [email protected].Subscribe to Supply Chain Management Review Magazine!
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