Don't Be Fooled into Complacency: Supply Chains Are as Vulnerable as Ever

By Dave DeWalt, Founder and CEO, NightDragon

I know what you’re thinking: Supply chain risk – that’s so 2021.

Well, you might want to reconsider.

Sure, while we now have steady supplies of consumer goods, semiconductors, autos, and the raw materials for many industrials, the reality is that many businesses are still facing constraints today that are no less challenging than they were at the height of the pandemic. 

In fact, according to a recent benchmark report by Interos, the average annual costs of different supply chain disruptions still range from $43 million to $47 million - a significant amount for any organization. The continued high costs of supply chain disruptions highlight the importance of building resilience and adaptability into your global supply chain frameworks. It’s not only a sound way to mitigate risk, but it’s also a powerful differentiator – a way to achieve competitive advantage on a global scale. Here are some areas to watch out for as we close out 2023 and head into the new year:

Geopolitical Unrest

Wars, terrorist attacks, and global trade disputes continue to cause supply chain disruptions around the globe. When asked specifically about the potential impact of geopolitical tensions on their suppliers and supply chains over the next three years, 85% of those surveyed by Interos say they are “extremely” or “somewhat concerned” about the impact, particularly around supply shortages and their associated costs. They also fear threats to critical infrastructure (ports, power plants, internet connectivity) from military or cyber-attacks.

Insufficient Risk Monitoring

Knowing who’s in your supply chain and what they are up to are merely table stakes for risk monitoring. Same with a diligent and rigorous selection of suppliers. Unfortunately, many organizations view this as a point in time exercise and not a priority. In fact, most organizations (59%) only conduct risk monitoring on a quarterly or biannual basis. Today, on average, critical suppliers are monitored every 20 weeks and other suppliers every 26 weeks. In our fast-paced world, that’s unacceptable as it leaves organizations wide open to unexpected and unpredictable risk.

Regulatory Challenges

Although complying with laws and regulations is essential to sound risk management, 79% of those surveyed agreed that supply chain regulations impose a heavy burden on their organizations from a cost, time, data, and resources standpoint. Additionally, the introduction of new laws that specifically target supply chains can lead to select shipments being seized, leading to significant impacts on organizations. Keeping up with regulatory requirements around the world requires that your suppliers are compliant as well. 

Good News and Recommendations

These are just a few examples of the ways that global supply chains continue to challenge organizations.

The good news is that there are corrective steps that can be taken today that can minimize risk without imposing a staggering cost and resource burden on your organization. For starters, many companies have found success in increasing diversification. Historically, companies relied on a single source for crucial components or materials. By diversifying suppliers, your organization can lessen the impact of single disruption while gaining the advantage of new sources of innovation and best practices.

In addition to diversification, organizations can establish collaborative networks of suppliers, customers, and even competitors to share resources, insights and risk management strategies. This is now seen as a positive opportunity to strengthen the broader network and is a situation where everyone wins.

Finally, technological advancements like the Internet of Things (IoT), blockchain, and advanced robotics are also being utilized to enhance visibility and traceability across the supply chain. Gone are the days of vague responses that come days after initial communications. Data shows that improving both customer service and customer experience is the most common business driver for better supply chain risk management.

While supply chain risk may be dominating headlines less than in previous years, the risk remains. Organizations that proactively respond to these risks will enhance their resilience, safeguard their reputation and drive competitive advantage. Interos calls it “Resilience by Design.”

It’s more than just a response to disruptions; it’s an active pursuit of change. Don’t be fooled into thinking of supply chain strength as merely a passing trend. It’s one of the most powerful tools you can deploy to drive growth, enhance your brand, and satisfy your discerning customers.

The threat of risk and supply chain disruption isn’t going away, but neither is the opportunity of resilience by design.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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