Four Ways to Combat Risk for Global Sourcing Success

4/7/2015
It's no secret that Bangladesh has suffered through some tough times over the past couple of years. Just when the region started to recover from the 2013 fire at Rana Plaza, a period of intense political unrest is now causing major disruptions in raw material supply across the region.

The Bangladesh garment industry, which represents 80 percent of the country's total exports, is experiencing big losses due to soaring air freight charges, production shortfalls, higher transportation costs, a decline in orders from international retailers and order cancellations. The fallout has been swift and devastating: Bangladesh has seen daily industry losses of $25.7 million and a 40 percent drop in foreign orders.

According to the 10th Global Risks 2015 report published by the World Economic Forum (WEF), interstate conflict is projected to be the most likely and most impactful global risk in 2015. Although it's impossible to eliminate risk in the supply chain completely, there are best practices for fortifying the supply chain against such disruptions and remaining resilient in the global marketplace.
  • Secure backup: Every business needs to have a plan B for when the unexpected happens. This is especially important when it comes to sourcing – having an alternate list of suppliers at the ready is crucial for avoiding hiccups in supply and keeping up with product demand. E-sourcing can identify ideal suppliers (in terms of product, price and contract terms) so other sourcing options are ready to go in the event a main supplier falls through on an order.
  • Ensure real-time visibility: Visibility across the entire supply chain is critical for noting the warning signs of disruptions in the supply base. Setting up alerts for potential disruptions helps mitigate risk before operations and performance are negatively impacted. Ideally, both companies and supply partners should be able to see the information simultaneously, so that they can work together to come to the best decision and streamline the risk prevention process.
  • Conduct frequent audits: Do the wages, working hours and factory conditions of suppliers (even beyond first-tier suppliers) comply with an ethical sourcing policy? Are there significant sources of risk, such as geo-political unrest, plaguing the region? This is the information that procurement leaders need to know in order to have complete control of the supply chain. Regular audits and on-site visits will ensure visibility into what's going on at each point in the supply chain, allowing procurement teams to proactively identify and fix potential disruptions.
  • Build and leverage relationships: Building relationships with both current and prospective suppliers is essential as collaboration with sourcing partners helps manage and streamline the response to a disruption. Improving relationships with sourcing partners gives procurement leaders visibility into the supply base and ultimately, real-time performance management, saving both money and time. Companies can pull from their pool of trusted suppliers and match them with the right short-term demands. Suppliers with whom procurement leaders have long-term relationships will be more apt to lend a helping hand when the going gets rough and work with you to solve the problem for mutual success.
A company's ability to adapt in such difficult circumstances is not only a successful approach to mitigating risk, but also a tool for long-term growth. We live in an interconnected world, which makes it utterly important to take a global perspective on risk – what happens in one part of the world will
affect business across the globe, and every business needs to be ready for the unexpected.

How are you fortifying your supply chain against such global disruptions? What does your plan for long-term global growth look like?


Mickey North Rizza is vice president of strategic services at BravoSolution. She is one of the top supply chain experts in the industry, a former analyst at both AMR and Gartner, and a member of the Institute for Supply Management. She leverages her practitioner heritage and deep domain knowledge to accelerate sourcing and procurement performance.
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