Supply chain action needs to be taken says expert

A leading risk management expert has said businesses face a huge challenge to address the current crises in the global supply chain.

Fusion risk management’s director of Third–Party Risk Management, Wes Loeffler, told Emerging Risks that the crises in the Red Sea and the issues which has seen severe restrictions on transits through the Panama canal have seen businesses look to adapt supply chains to reduce risks.

“While the media coverage around supply chain impacts has tailed off the threat remains,” he explained.

Loeffler said that there was growing evidence that businesses were looking at their supply chains with some looking to other suppliers in other geographic locations to reduce the risks they face.

“Given the risks that have emerged in recent month businesses need to be examining their supply chain risk,” he explained. “There are lessons that could and should have been learned, but there does not seem to have been a great deal of changer.

“ I have heard that some companies have been working to sources multiple partners from multiple jurisdictions.”

Loeffler said that cones with he need to a thorough risk management review of third parties to ensure that the supply chain is robust and secure.

“There is a real need for risk assessments and they can take six to nine months, and it involves a level of expense. However, it needs to be carried out.”

He added that there have been occasions where staps have bene taken to bring vital supplies closer to the end user.

“We have seen in the USA steps to create a capacity for the manufacture of microprocessors  given the significant shortage of supply which has been caused by supply chain delays,” added Loeffler. “Geopolitical risks are still significant.

“The war in Ukraine and the conflict in Gaza are continuing to affect supply chains. What businesses need to do is understand their supply chain and the risks that are affecting it.”

He added that un 2020 some 50% of companies said they did not know all their third parties are and very few said they were aware of who their four parities were.”

He continued: “For a business to know who their fourth, it means their third party partners need to disclose who they are.

“It has been estimated on average a firm may have 5880 third parties in their supply chain. If you then look to count the fourth parities that can be hundreds of thousands of enterprises.”

He added that it may take a business to be faced with the loss of a key component for their business to recognise just how large a threat they face.

“If you are not thinking about the strength of your supply chain and the parties on which you rely now then you should be,” Loeffler said.