TÜV Rheinland Blog - Insights from Asia and Africa

Optimising Your Supply Chain!

Posted by TUV Rheinland on Jan 23, 2019 12:10:01 PM
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This article originally appeared in The Machinist, July 2018.

Chitradeep Banerjee, Director of Sales, Systems Certification at TÜV Rheinland India, talks about the contingencies faced with supply chains, and how Supply Chain Systems can help manage risk and improve quality.

 

Q: We all know how important it is to mitigate contingencies in order to sustain market value. Can you share your views on the contingencies faced in supply chains?

The inherent complexity in supply chain systems increases the likelihood of contingencies. Ignoring such contingencies can prove to be costly to an organisation in terms of money, productivity, and market reputation. Contingency management plays a vital role in the supply chain business. Any non-compliance can lead to a disaster if there is a lack of awareness or negligence. Supply chain contingencies are those that impact the 3Ms: Man, Material, and Machine, along the entire chain from manufacturer to suppliers to consumers. If we go for a risk-based thinking approach, we sometimes come across stray cases that might also have a Socio-Economic Impact.

The complexity of supply chains requires an assessment of the types of contingencies involved, and factors that may contribute to their occurrence. Two broad categories of contingencies exist: internal and external.

 

Supply chain contingencies

External supply chain contingencies

External contingencies can be driven by events either upstream
or downstream in the supply chain.

Demand risk - caused by unpredictable or misunderstood
customer or end-customer demand,

Supply risk - caused by any interruptions to the flow of
product, whether raw material or parts, within your supply
chain,

Environmental risk - from outside the supply chain; usually
related to economic, social, governmental, and climate factors
including the threat of terrorism,

Business risk - caused by factors such as a supplier’s financial
or management instability, or purchase and sale of supplier
companies,

Physical plant risk - caused by the condition of a supplier’s
physical facility and regulatory compliance issues

Internal supply chain contingencies

Internal contingencies provide better opportunities for mitigation because
they are within your business’s control.

Manufacturing risk - caused by disruptions of internal operations or
processes,

Business risk - caused by changes in key personnel, management,
reporting structures or business processes, such as the way purchasers
communicate to suppliers and customers,

Planning and control risk - caused by inadequate assessment and
planning, which amount to ineffective management,

Mitigation and risk - caused by not putting contingency plans (or
alternative solutions) in place in case something goes wrong,

Cultural risk - caused by a business’s cultural tendency to hide or delay the
dissemination of negative information. Such businesses are generally slower
to react when impacted by unexpected events that have the potential to
disrupt the supply chain.

 


 

Q: What are the relevant security certifications which can help Supply Chain Systems in this context?

Any security standard, when practiced in true spirit, consistently, and constantly, will lead to achieving comprehensive benefits. The true essence s always felt if we implement a relevant security standard without deviating from the guiding principles of the standard. An organisation needs to select the right certification based on its requirements, markets, needs of the customer, and above all which leads to sustainable, long-term growth for the organisation. Certifying bodies such as ours provide clarification in all fields and domains, from Information Security and Supply Chain management to Social and Quality Compliance. My recommendation will be for an organisation to go for TAPA FSR/TSR since it takes care of the complete security aspect of their goods, whether it is stored in a warehouse or in transit.

Transportation security services are primarily based on two sets of standards: Facility Security Requirements (FSR) and Truck Security Requirements (TSR). FSR can be achieved at one of three levels: Class A, B, and C, with Class A being the highest level of security; monitoring the level of security for facilities and warehouse used for storing and transporting goods. Audits generally include two to three days of audits a the facility, with results compared against TAPA’s standards. Repeat audits conducted at regular intervals, over a three-year period. Supply chain contingencies affect a wide range of stakeholders, where the direct players are the producers, the logistics providers, retailers, and the customers. In addition, there are also the providers of finance and consumer pressure groups, to name a few.

 

Q: How do you foresee improved quality and safety measures implemented in the area of Supply Chain in India?

Improvements in any industry are driven by decision makers and leaders. Awareness of quality and a vision of transformation will always help in paving the right path towards success. Leading organisations are increasingly looking at improving the performance of their supply chains in order to deliver reduced cost, increased revenue, and, most importantly, increased shareholder and customer value. Continual improvement in supply chain systems can be achieved by implementing strategies and best practices adopted by high-performing organisations. (See table 2)

Table 2: Strategies and best practices
adopted by high-performing organizations

  • Provide insights into the health of supply chains by
    using a robust set of data analytics,
  • Transform global supply chains through a cross-
    disciplinary approach spanning operations, tax and risk,
  • Review, improve and assess contingency of
    procurement functions to realize long-term, sustainable
    benefits,
  • Improve supply chains and infrastructure in emerging
    markets as a powerful catalyst to secure new market
    share and drive revenue growth,
  • Integrate environmental, sustainable and low carbon
    aspects into end-to-end supply chains,
  • Provide sector-specific supply chain insights with
    experienced supply chain professionals from the
    respective industries.

 

Q: What is your perspective on the need to put in place a proactive contingency-based action plan and how should such a plan be developed?

In order to deliver, one ought to know the requirement upfront. At the outset, the stakeholders of supply chain need to perform a business impact analysis and a thorough gap analysis. Pitfalls in the supply chain should be identified and categorised, based on a severity scale. This can only be achieved when a frequent surveillance check is carried out. Generally, contingency-based action plans are developed based on outputs obtained from the below analyses and assessments:

  • Mapping Stage-wise Cargo Flow and Business Partners
  • Conduct Threat Assessment
  • Conduct Vulnerability Assessment
  • Prepare an Action Plan
  • Document How Risk Assessments are conducted along with mitigation plans

 

Q: Are testing standards and certifications important for alternate supply chain plans? Should it be mandatory for all organisations?

This question reminds me of a concept I learnt from a teacher in school: the “Maker-Checker” concept. The best way to find out what has been done right is to check and re-check. While re-checking, in the context of the supply chain system, can be done from second-party audits, the process of quality checks is further strengthened when a third-party conducts audits, as per prescribed set of standards, to determine if there are any gaps in the system. Here, when it comes to security and supply chain contingencies, I believe that standards and certifications should be made mandatory. Government statutory bodies, regulatory bodies, and those directly or indirectly linked to the supply chain should take steps to safeguard the interests of the end consumer. Standards and Certifications are necessary to maintain quality, security, and safety within the system. They minimise risk factors and contribute significantly to bringing greater reliability, sustainability, and business continuity to the entire ecosystem in the supply chain.

 

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Topics: Risk Management, systems, Supply Chain