Taking An Industry-Specific Approach To Supply Chain Risk

Electronic technology products have some of the most complex supply chains on the planet. A high volume of highly specialized parts means manufacturers and suppliers must coordinate to get the correct items to where they need to go. Yet with so many moving parts, opportunities for supply chain bottlenecks and breakdowns are nearly everywhere.

Companies with complex electronic technology supply chains in industries like medical devices or aerospace and defense must take an approach to supply chain risk management that addresses the unique characteristics of their markets, according to Farida Ali, CEO and president of Dynamic Computer Corporation. But as Ali told PYMNTS in a recent interview, the nuances and variety of the risks in today’s ecosystem can be overwhelming. “When we think about risk, it seems like something fuzzy, scary and unknowable,” she said. “It’s out there, and it’s dangerous.”

But through an objective and deliberate approach to supply chain risk management, organizations can avoid potentially disastrous scenarios — and deliver lessons to supply chains in other industries, too.

The Complexities Of Electronics

Every supply chain faces risks, but depending on the industry, not all risks are created equal. In the electronic technology arena, a few key risks can be especially damaging to organizations within the supply chain. “Especially with technology components, there is a risk of inauthentic or tampered-with components,” noted Ali. “You have to be very careful about cyber risk.”

It’s not uncommon in this industry for organizations to rely too heavily on a single supplier for a component that may not be commonplace, which can elevate the risk of that important vendor facing some kind of disruption. Other factors in this space that enhance risk include a tendency to build too many custom products (the parts of which cannot be easily sourced elsewhere) or to use components that quickly reach their end-of-life, meaning the supplier decommissions that product and no longer markets or sells it.

In an effort to help industry stakeholders understand and mediate these threats, Dynamic Computer Corporation recently rolled out its Dynamic Supply Chain Risk Scoring methodology to identify potential risks within its clients’ supply chains, taking into account industry-specific expertise.

Understanding the nuances of one’s market is critical to a successful supply chain risk management strategy. But as it turns out, many of the lessons learned within the electronic technology arena can be applied to other supply chains and product categories, too.

Lessons Learned

While this sector faces unique supply chain risks, the strategies that can alleviate those threats are tools and techniques that can be valuable to supply chains across verticals.

For example, Ali highlighted the importance of supplier diversification in order to ensure that parts and components can be sourced from more than one vendor. Further, establishing trust between business partners is critical to addressing the threat of inauthentic parts.

“A lot of this is about understanding and knowing partners in the supply chain,” she explained. “If you place an order with a broker, or someone who is loosely affiliated with an organization, you’re creating a lot more risk. Trusting everything over the internet can be a difficult and risky proposition.”

Organizations can be proactive about how they mitigate their biggest industry-specific supply chain threats, too. For instance, in the electronic technology space, firms should secure a sample of a component before they place and pay for an order. Otherwise, it can be next to impossible to recoup funds sent to a supplier that has delivered faulty, inauthentic or tampered-with products.

Supply chain risk management continues to become an intensifying headache, especially for businesses in complex industries. In addition to their unique challenges, businesses also face threats that are industry-agnostic: Geopolitical turmoil, as well as black swan events, can disrupt supply chains and the money that flows through them. But by taking a tactical approach to understanding risks before they occur, Ali said businesses can mitigate threats right at the moment of sourcing, rather than scrambling to address disruption further down the procurement process.

“The idea of all of these unexpected, black swan events that come up — whether it’s a tsunami in Asia or COVID-19 or some kind of political trade disruption — we have to be cognizant of it and plan for it,” she said.