How to manage supply chain risk and resilience after COVID-19

by Mark Anderson Automotive Forensics Leader and Supply Chain Resilience Leader, PwC UK

Email +44 (0)7770 921256

Every year the Oxford English Dictionary announces a ‘word of the year’ that reflects the year’s mood and developments. In 2020, due to the sheer number of developments, it announced 47. Lockdown, support bubbles, doomscrolling, zoombombing. All became mainstream last year, cementing their place in everyday conversation, sometimes overnight.

Though it didn’t make the official list, I definitely saw a rise in the use of ‘supply chain resilience’ in strategic conversations last year. In the years running up to 2020 many companies had started to take a deeper interest in how they were managing third party and supply chain risk. But it wasn’t until the first weeks of the pandemic when the implications really hit home.

China’s Hubei province – a global manufacturing hub for pharmaceuticals, electronics and car parts – was suddenly closed for business. Lockdowns then spread from country to country, leaving supply chains exposed and organisations scrambling. We’ve all heard the stories. Jaguar Land Rover flying in parts in suitcases. Apple warning of disruption to iPhone supply. And many others that didn’t make the news.

Companies were already ramping up risk management around the supply chain to prepare for Brexit, but there was some complacency in over-reliance on Tier 1 suppliers to manage risk in the lower tiers of the supply chain. COVID-19 has made organisations very aware of the costs of complacency, and supply chain and third party risk and resilience are now a key management priority in 2021.

Effectively managing supply chain and third party risk and resilience

Over the past year we’ve worked closely with clients to help them get a full picture of risk across all their third party interactions, understand the criticality of supplier relationships, and build resilience. The pandemic has accentuated the need for complete visibility of the supply chain. It’s all very well knowing your Tier 1 and 2 suppliers, but if anyone in the lower tiers fails or has heightened risk exposure, it’ll quickly ripple along your entire ecosystem.

Mapping all tiers of suppliers and relationships with other third parties, and understanding the different risks each may pose is an essential first step to building resilience. The pandemic has also underlined the importance of flexibility, scenario planning and the ability to quickly switch to alternative sourcing arrangements.

Assessing and monitoring third party risk is an absorbing and time-consuming task, requiring you to gather up-to-date and accurate global data around the financial, operational and reputational health of suppliers and other third parties. We’ve seen organisations increasingly using Execution Managed Services (EMS), and taking advantage of third party risk management (TPRM) and supply chain resilience services to make it easier to effectively manage risk.

Used effectively, EMS can support across the whole supplier chain, and help you to track and manage risk over time. A good EMS system integrates social media chatter as well as external and internal market data sources with client and supplier data, and uses AI analytics to provide deep insight into supply chains. This gives you time and support to intervene when there are warning signs. It also provides access to better resources, technology and insight than you could access on your own.

Strong TPRM has become a business imperative with commercial benefits as well as protective qualities. For more information, visit our webpage or get in touch.

by Mark Anderson Automotive Forensics Leader and Supply Chain Resilience Leader, PwC UK

Email +44 (0)7770 921256