Leveraging Technology to Mitigate Risk: Part I

One of the hottest issues surfacing at this year’s annual Gartner supply chain conference was risk management, with one particular luncheon session generating dialogue that spilled out into the halls. “When we entered this business six-and-a-half years ago, the technology for mapping and monitoring supply chain risk was still in its infancy,” says Bindiya Vakil, CEO and founder of Resilinc, a leading Supply Chain Risk Management (SCRM) solution provider. “Since then, the entire marketplace has been growing by exponential leaps and bounds.”

Given the number of highly disruptive global supply chain events in recent years, this should not come as much of surprise. Earthquakes, tsunamis, floods, and fires have captured mainstream media headlines and brought a greater awareness to ordinary consumers about the fragility of shipping and sourcing. That awareness within our own industry has led to more vigilance when it comes to selecting second- and third-tier suppliers who must be constantly evaluated and measured for their security.

Bill Hurles, a recently retired GM supply chain executive who now serves as the executive director of the non-profit Global Supply Chain Resiliency Council, says that supply chain risk management is an “emerging” professional discipline and technology solution category that has delivered significant business value to innovators and early adopters.

“However, it hasn’t yet ‘crossed the chasm’ to mainstream enterprise adoption,” says Hurles. “What’s really needed is multi-tiered supply chain mapping, that is also proactive for post-event response strategies. Aggregating massive amounts of information can be a good start in this direction.”

Lee Young, director of supplier quality for Thermo Fisher Scientific—a global pharmaceutical research and development company—agrees that “big data” is essential, but that it can become overwhelming. “Realistically, we can only actively track about a fifth of our direct vendors,” he says. “That’s why it’s crucial to examine where to stock inventory and where to save money by keeping things lean and agile.”

Analytics essential

According to Steve Banker, vice president of supply chain management with ARC Advisory Group, one of the most promising developments in the risk mitigation arena is the development of new software applications that can dig down to the granular level of procurement and distribution networks.

“A number of startups are beginning to gain recognition in this field,” says Banker. Most notably, he says, are Riskmethods, based in Munich, Germany, and Mountain View, Calif.-based Elementum.

Riskmethods, focuses primarily on SMEs and large businesses in all industries, which purchase on an international basis, as does Elementum.

“We spoke with some shippers are very excited about their ‘early warning system’ for potential risks,” says Banker. “This app ensures that proactive steps can be taken to avoid supply interruption, enforce compliance and brand protection.”

According to Banker, both RiskMethods and Elementum are designed to detect major external risks very quickly, although he allows that Elementum’s solution is a bit broader.

And what about the old war horses, SAP and Oracle?

“Broader still,” says Banker, “as these two in particular are looking to use their control tower as the central place to balance supply and demand.”

Elementum’s founding CEO Nader Mikhail, says the startup aims to be like Salesforce.com, with CRM focused risk mitigation for logistics managers.

“Most of managers wouldn’t even know what systems underlie their supply chain because they just see spreadsheets,” Mikhail says. “That’s led the CRM and enterprise resource planning players to be complacent and too expensive.”

Customized solutions

Coinciding with the Gartner event was ISM’s annual conference where risk mitigation was another major topic of discussion. According to Gerard Smith, president of Global Management Risk Solutions (GMRS) in Newport Beach, Calif., a record number of shippers were registered for security briefings there.

“The range of shipper demands are growing and that requires that we add bandwidth on a continual basis. It’s a challenge all of us in this space are facing.”

Jason Busch Founder, head of strategy for AZUL Partners, Inc. a procurement, and trade financing consultancy, says GMRS has carved out a valuable niche by not charging logistics managers for their services.

“The company is fueled by a supplier-funded revenue model that outsources data aggregation,” he notes. “Their validation service is global in scope, spanning onboarding, regulatory compliance, environmental health and safety, risk management, and diversity data.”

Which is all well and good with Deborah Wilson, a supply chain risk management analyst with Gartner. She also observes that manufacturers and “brand owners” will increasingly deploy solutions that address risk for specific categories of spending.

“This strategy will allow organizations to mitigate risks quickly and with minimal resources, because solutions will be purpose-built and often include baked-in risk assessment methodologies,” says Wilson.
In a recent paper co-authored by Gartner analyst Ray Barger, Jr. titled 2016 Strategic Roadmap for Supply Solution Deployment, Wilson cites several examples of narrowly scoped, spend-category-specific solutions that address supply risk include. For example she says the MetricStream enterprise risk management (ERM) app, identifies IT vendor technology spend. She also names Hiperos as a leader in this space.

In the “bill-of-material” analytics solutions for electronic components, Paradata is among Gartner’s niche leaders. Based in San Jose, Calif., Paradata, uses internal and external “big data” to help high tech OEMs identify cost, lead time, compliance and risk problems and offer verified insights to fix problems before they happen.

“Paradata is bringing a data-first approach to the bill of materials, uncovering fraud, and potentially creating millions of dollars of operating profit and lower cost of goods sold,” says Wilson.

Tomorrow: Workforce Concerns