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Table of Contents
Global Sourcing Increases Supply Chain Risks ..............................................................................3
Conclusion .....................................................................................................................................8
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How Collaboration Reduces Your Global Supplier Risks
Today’s global supply chains are increasingly complex and disruptions are a common occurrence. A current example is
the congestion that’s been plaguing U.S. West Coast ports for several months resulting in weeklong shipment delays.
These disruptions can be driven by a variety of events that include labor disputes, Customs delays, natural disasters
and other incidents. Following the March 2011 tsunami and earthquake in Japan, supply chains worldwide felt the
impact of this natural disaster as Japanese manufactured exports worldwide dropped dramatically. The lessons to be
learned from this natural disaster are still being analyzed by supply chain experts as a means of pre-empting further
and future ramifications from such a catastrophe.
Risk comes in many forms and the key to insulating your supply chain against costly delays, or failures, can be found
through software solutions and process changes. Instituting a robust collaborative software platform and consolidating
data from your external systems results in the ability to buffer your supply chain operations from all major risk factors.
While the examples throughout this whitepaper focus on the Retail industry, the issues, concepts and benefits of a
collaborative supplier network apply across industries.
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How Collaboration Reduces Your Global Supplier Risks
Industry experts agree that you can’t plan for every eventuality so you have to strive to identify and address the major
weaknesses. This is the first step; take a long hard look at your supply chain to determine what vulnerabilities might
exist. While risks vary by company and industry, some common sources that warrant scrutiny by sourcing professionals
to maintain the flow of goods include:
Environmental — These are risks that occur in the natural world, including “Acts of God”, human- related accidents
like fire or other disruptions to production that lead to other breakdowns. More recently, socio-political instability
plays a role as it places a strain on the people, economies and governments where sourcing is more prevalent.
Organizational — Organizational risks are classified as either external or internal. The external risks result from
outside pressures on the organization, such as political, economic, technological, sociological or cultural changes.
These changes create a negative influence on the goals of the company. Keep in mind that external organizational
risks include all of the partners in your trading network.
Internal risks can result from business processes or the management of information. In a recently published study,
nearly 70% of executives lack the information they need to manage effectively because employees withhold vital
input out of fear that doing otherwise will reflect poorly on them1. This is an example of internal organizational risk
based on information management.
Network-relational — Following the technology boom of the ‘90’s, the world became flat – a term often referred
to when describing the globalization of commerce and the shift required for countries, companies and individuals
to remain competitive in a global market where historical and geographical divisions became increasingly non-
existent. This shift brought with it the need for technology and people to build bigger “networks” to function
effectively. In turn, the amplified number of connections leads to the risks of breakdown in communication or
linkage. Likewise, technology itself brings risks; the physical failures to hardware and software that facilitates
communication, and the increased potential for intellectual property (IP) theft that leads to loss of exclusivity.2
When applying these risk types to the retail supply chain, we can easily see where the fractures might appear and
cause a major break. Given the number of countries retailers and brands typically source from and the expansive
distance between the production point and the point of sale, the threats of risk from the ecosystem is high. The nature
of doing business globally combined with the multi-tiered network of people and technology, complicate the situation
and create a difficult environment for managing global supply chain risks.
1 Susan Feldman and Chris Sherman, (2010) “The High Cost of Not Finding Information”, p.1.
2 Uta Juttner, Helen Peck and Martin Christopher, (2003) “Supply Chain Risk Management: Outlining an Agenda for Future Research”,
International Journal of Logistics: Research and Applications, Vol.6, No.4, pp.199-213.
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How Collaboration Reduces Your Global Supplier Risks
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How Collaboration Reduces Your Global Supplier Risks
Agility — Working in tandem with a collaborative risk management process, retailers can introduce agility to the
supply chain. This is where both proactive and reactive measures can be employed to contend with risk. Practices
like postponement, multi-sourcing, and supplier diversification provide choices for supply chain managers to delay
activities or select which suppliers they should source from to avoid possible threats.3
Each of these methods of risk management have merit, depending on the scenario, with the collaboration and agility
approaches providing the best overall response to managing risk in the retail supply chain. However, collaboration and
the agility that results from a group effort can only be achieved by involving suppliers at every level where significant
benefits can be achieved.
Previously, many companies did not explore effective collaboration with supply chain partners because of a lack of
trust. The traditional lack of trust and control prevented retailers from collaborating closely with suppliers, causing
friction and redundancy when both parties duplicated the same tasks. With the transparency of shared data and
mutual collaboration, retailers are more comfortable sharing responsibilities with suppliers. The recent trend to more
open and bi-lateral communication has made this challenge a non-issue. The trust factor is no longer a barrier for
developing and maintaining collaborative relationships and most retailers have dismissed this as a concern.4
3 Ibid.
4 Adi Zukerman and Dave del Corral, “PLM 2,0: Achieving PLM’s Promised Value”, Apparel, April 10, 2012, 20.
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How Collaboration Reduces Your Global Supplier Risks
Logistics — Risk and agility are optimized through real-time visibility into global logistics activities providing the
ability to quickly react to demand changes and unexpected disruptions. Also, with increased visibility you can make
order and shipment modifications quickly to dodge any incoming obstacles and improve reaction time to customer
changes. The shared visibility and collaboration gives suppliers, at each tier, insight into possible dropped styles or
order postponements – all leading to a more nimble and responsive supply chain.
5 Janet Suleski & Lucie Draper, “Sourcing Maturity: Finding the Path to Sourcing and PLM Integration Excellence”, Apparel, Nov. 22,
2011, pp. 15-18.
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How Collaboration Reduces Your Global Supplier Risks
Conclusion
Global sourcing has complicated retail supply chains with an array of risks and variables that must be managed, both
proactively and reactively, to avoid disruptions like quality issues, shipment delays, product shortages, excessive
expediting costs and others.
In order to minimize supply chain risks, you need to implement processes and technology that identify the risks, utilize
the best approach to reduce each type of risk, analyze future risks, and collaborate with supply chain trading partners
to react before, during and after disruptions.
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