Whether your company sources supplies locally or from halfway around the world, it makes sense to have a proactive strategy for managing supply chain risks in 2024.
Global events and supply chain risks
Recent global events have led many businesses to change how they approach supplier management.
For example, many are transitioning away from traditional offshoring to so-called “near-shoring” or “friend-shoring”. Also, cloud-based software is playing a greater role in managing risk.
A number of factors are driving these changes.
Geo-political tensions impacting cross-border trade
Geo-political tensions in a number of regions are impacting cross-border trade. Examples range from the continued fallout of Brexit to the war in the Ukraine, conflict in the Middle East, and tensions between the United States and China.
The risk of trade routes being shut down and essential materials becoming inaccessible has led to nations generally becoming more skeptical about cooperation and interdependence.
Domestic self-sufficiency in material supply and manufacturing is seen as the best way to secure the supply of goods. Failing this, friend-shoring with like-minded and geographically nearby suppliers helps minimise risk.
Strategies for managing the risks of cross-border trade
To manage the risks of cross-border trade, KPMG suggests businesses should take these steps:
- assess the potential impact of geo-political tensions on your supply chain by modelling different scenarios
- consider how you can leverage friend-shoring or near-shoring.
- work out how your business would manage if a key material or critical input became inaccessible (and how this could affect regulatory and/or customer approval)
- determine the cost impacts of sourcing from new markets or suppliers
- assess how friend-shoring or near-shoring would impact lead times
- consider how your business could become more responsive and agile, while reducing costs.
Shifts in supplier and manufacturing locations
Geo-political pressures, alongside factors like greater calls for product customization, online selling, and price increases in existing manufacturing locations, are driving changes in where companies source both materials and mass-manufactured parts and products.
Businesses are also shifting manufacturing locations.
According to KPMG, between 2018 and 2023 more than seven out of 10 companies announced a shift of their manufacturing operations to locations in Asia.
However, higher transportation costs, restrictions imposed during the pandemic and ongoing political tensions are contributing to a move away from China as the “workshop of the world”.
Other Asian countries are becoming more popular as production locations.
Also increasing in popularity are countries such as Mexico, Turkey and the Czech Republic.
2024 considerations for choosing supplier/manufacturing location
Consider these key factors when choosing a supplier or manufacturing location:
- Will shifting your manufacturing location help the competitiveness of your products?
- Should your business source from multiple suppliers/manufacturers in different locations/countries to reduce the risk of operational uncertainties?
- Is contracting global organizations to manufacture on your behalf a viable opportunity?
- Should manufacturing be brought onshore within the next few years?
- Is mass manufacturing right for your business?
- Should customized manufacturing approaches be considered?
Cyber-crime and infiltration of supply networks
Cyber-crime is an ever-present threat and global attacks are expected to soar, according to the Cybersecurity Ventures report, which cites seven reasons for this:
- The dismal global economic outlook means businesses have less budget to implement strong security.
- Ransomware and other malware tools are cheap to access and easy to implement.
- Geopolitical conflict means international collaboration to take down cyber gangs is less likely.
- Cyber gangs are increasingly targeting smaller organizations with weaker security.
- Cyber insurance is increasingly unaffordable, and coverage limited.
- A rapidly expanding number of IoT devices means a larger attack surface.
- Global conflict promotes political attacks and environmental hacktivists.
Cyber criminals are increasingly sophisticated at infiltrating supply chains, particularly via your supplier network and through basic warehouse equipment, and IoT devices within manufacturing and operational sites.
Investing in new technology, changing supplier networks, and moving to near-shoring or friend-shoring may compound your cyber risk.
Quality management and cyber-crime: recommended strategies
Given its prevalence and potentially devastating consequences, cyber-crime has to be managed as part of any organization’s risk management system.
To mitigate cyber-crime, KPMG recommends these actions:
- Identify robust strategies with your partners to mitigate supply-chain cyber risk.
- Implement thorough cyber-risk assessments for new third parties in your supply chain ecosystem.
- Implement AI and machine learning as onboarding processes for new suppliers.
- Mitigate human error – the cause of close to 95% of successful cyber-attacks – by defining strategies to leverage technology and automation.
- Conduct a cyber assessment for all supply chain functions and activities.
Acceleration of cloud-based digital transformation
Research shows that six in 10 organizations plan to invest in cloud-based digital technology to bolster their supply chain processes, data synthesis and analysis and operational capabilities – and to mitigate economic stagnation and the impact of inflation.
Leveraging technology for supply chain management in 2024
Dedicated risk management software can be used to manage supply chain and third-party risks. A move to cloud-based QMS solutions enables third-party suppliers to enter and access relevant data. Implement these key actions:
- Maintain operational stability by prioritizing technology investment in supply chain capabilities and end-to-end visibility enabled by real-time analytics.
- Make the most of insights-led decision making by upskilling teams and fast-tracking data-management policies and capabilities.
- Invest in automation to replace redundant supply-chain activities, drive productivity gains and protect against margin squeeze and cost increases.
Manage supply chain risks with isoTracker’s QMS software
isoTracker offers risk management software that is secure, cloud-based and affordable. The software makes it easier to identify, monitor, assess, and mitigate risks, including supply chain risks. It enables “anywhere, any time” access by authorized individuals across an organization and its supply chain partners.
Sign up for a free 60-day trial of isoTracker’s full suite of quality management software (including our risk module) or contact us to discuss your needs.
