Explainer: How Supply Chains Can Be Both Resilient & Ethical

Logically, supply chain woes should be easing after the end of pandemic shutdowns in most countries. 

However, it’s not just the pandemic that’s been causing issues. As this article explains, it’s a confluence of factors, including port congestion and the Russia-Ukraine war.

This is your guide to identifying and adopting strategies to ensure your supply chains are both ethical and resilient.

Ongoing supply chain challenges

The UN’s Economic Commission for Europe recently hosted a roundtable about international supply chains, with McKinsey chairing the session. It found:

  • Staff shortages, equipment availability and global bottlenecks were critical challenges
  • Companies were navigating supply chains in a “climate of persistent unpredictability”.

According to the forum, business executives are dealing with these challenges by:

  • Automating supply chains to deal with the labour shortage
  • Better coordination using data for more seamless operations and greater visibility across the supply chain, and
  • Optimism that public sector organisations will take action, including:
  • Promoting employment in transport and logistics
  • Regulation to help make the industry more attractive and accessible for would-be staff, plus 
  • Infrastructure investment.

Resilient supply chain strategies

How much does your business rely on a single vendor or geographic area for products? A viable solution might not be as simple as reshoring or finding more third-party vendors. Doing so without due diligence could unwittingly increase your cyber risks, according to the Australian Cyber Security Centre

Here’s what you can do to build more resilience in your supply chains:

  • Embed best practices and tight controls that give you a full view of your third-party risk management program
  • Look into your extended supply chains to identify their risks. Locate the most vulnerable vendors, so you have alternatives if something goes awry
  • Formalise your agreements with suppliers, setting terms, conditions and service levels, allowing you to share risk exposure. Monitor and evaluate their performance to keep them accountable, yet collaborate to deal with risks
  • Accept disruption is part of doing business, so develop a process to manage it to keep your operations humming. Look into harnessing a just-in-case inventory strategy.

Ethical considerations

As well, the rising trend of environmental, social and governance (ESG) reporting standards will impact how Australian SMEs operate, including supply chain management. It means being transparent about how your procurement and operations are clean, green and use legal and humane business practices. 

Last month, the Sydney Morning Herald reported the federal government was looking to introduce legislation this year compelling larger businesses to disclose climate-related risks.

Social standards also apply. For example, modern slavery laws directly impact businesses earning more than $100M in annual consolidated revenue. You could still be impacted as an SME if you’re part of large enterprise’s supply chain. If larger entities ask you for information to help them meet their reporting and other obligations and you refuse or can’t comply, that’s a hurdle to partnering with them. For more info, check out this factsheet from the NSW Small Business Commissioner.

The ESG movement should encourage you to interrogate your supply chains for environmental, social and governance risks. Technological tools, such as Aravo or these alternatives, can help with third-party risk management.

Protect your business with the right insurance

You can also talk to us for insights into risk management regarding your supply chain. We can help identify key risks, work out their impact and guide you on strategies to minimise risks. We can help recover and restore your operations, should there be an issue.

Business interruption insurance could help protect your business against the vagaries of supply chains. Along with a robust business continuity plan, such cover is a good investment against disruption.