trace. partner Mathew recently discussed the importance of understanding the end-to-end supply chain, for industry and governments, in the quest to improve supply chain resilience.
Why is it important for both industry and governments to understand end-to-end supply chains?
Mathew: Arguably the most important reason for both industry and governments to understand end-to-end supply chains is risk. The COVID-19 pandemic has brought this into stark contrast, but supply chain risk extends from just the threat of physical disruption and how we manage that, to broader risks around sustainability, forced labour, environmental damage, and human rights abuses throughout the tiers of a supply chain.
While businesses have a direct interest in protecting their reputation and bottom line, governments are increasingly understanding they have a role to play, together with the private sector, in protecting our critical national interests. A good example in Australia was the establishment of the Office of Supply Chain Resilience in July 2021.
Can you give us an example of how a company can identify potential risks and vulnerabilities in their supply chains?
Mathew: One approach is to conduct a thorough supplier assessment that includes an evaluation of a company's n-tier suppliers. "N-tier suppliers" refers to the suppliers of a company’s suppliers, and so on, down the supply chain. Understanding these n-tier suppliers can have a significant impact on the overall effectiveness, efficiency, sustainability and ethical performance of a company's supply chain. In many cases, and especially for an import/export-oriented country like Australia, suppliers are in different countries and may operate under different regulations, making it difficult to monitor their practices. There are several technology products available to assist with this.
This assessment can include information on supplier mapping, supplier performance, compliance with regulations, and social and environmental impacts. By conducting these assessments, companies can identify potential risks and vulnerabilities and work with their suppliers to address these issues.
What role can governments play in helping companies understand their supply chains?
Mathew: One relatively low-cost way is for governments to share more of the rich, broad data sets they often have access to, which can paint an informative picture of macro-level vulnerabilities, risks, as well as opportunities. At its most useful, this data helps industries identify their own risks and improve their resilience.
A more standard role is governments promoting supply chain transparency and sustainability by implementing regulations and standards that require companies to report on their supply chain practices.
Finally, governments can provide capability, support and resources to help companies identify and address risks in their supply chains. For example, governments can provide training and capacity building for suppliers to improve their sustainability practices.
How can industries and governments work together to improve supply chain transparency and sustainability?
Mathew: Collaboration between industries and governments is essential to improving supply chain resilience and sustainability. A good starting point is data sharing - setting up a framework through which governments and the private sector can ethically share data on their supply chains. Better data enables better analytics, improving the capability of all stakeholders to identify vulnerabilities, mitigate risks and improve resilience.
On the regulatory side, governments can work with industries to develop and implement better standards that encourage responsible supply chain practices. Industries, in turn, can provide feedback to governments on the effectiveness of these and work with them to implement them successfully.
Contact us today, trace. your supply chain consulting partner.