How to mitigate the risks of complex supply chains

Businesses are often reliant on complex supply chains, which can make them vulnerable to crises. Here’s how OSH professionals can support business continuity.

In 2015, PECB Insights magazine published the findings from a survey of 500 risk managers and experts from 40 countries who were asked to identify the top 10 business risks in the Europe, Middle East and Africa (EMEA) region (PECB, 2018): 44% placed the risk of supply chain interruption at the top of their list.

Fast-forward five years, and most were caught off guard by the COVID-19 pandemic and the disruption it brought to the network of products and services provision that characterises the global supply chain.

As Brexit, the container ship blocking the Suez Canal and the war in Ukraine further illustrate, businesses that are reliant on extensive supply chains must maintain the complicated logistics that enable the just-in-time economy. However, businesses will remain vulnerable to changing circumstances, particularly if they are dependent on a single or a few suppliers (see panel The case of semi-conductors in Taiwan).

Russell Clark (pictured), vice-president, operational risk, DHL Supply Chain UK&I, observes from the perspective of a global logistics provider: ‘Business continuity has a vital role to play amid supply chain disruption as companies try to maintain operations and critical functions despite ongoing challenges.’

Jason Johnson CMIOSH, crisis and continuity manager at Inverroy Crisis Management, concurs. He believes the pandemic has been a huge wake-up call for businesses, leading many to reassess their supply chain management with a renewed focus on business objectives and how they can be sustained in the event of a disruption.

Robust auditing

However, he warns many still don’t pursue a proactive approach to managing risk in their supply chains, and advises businesses to undertake a robust top-to-bottom audit.

‘When you complete your contracts, especially in relation to your supply chain, you haven’t just got to go to your main contractor – you’ve got to speak to their subcontractors, just to make sure you have got that robust A-Z supply,’ he explains.

An important point to consider when planning for – and responding to – any crisis is that supply chains are typically sector-specific. This will significantly influence the level of disruption and, as a consequence, the requirements of any business continuity plans.

Angela Gray, a senior OSH specialist at IOSH, has gained significant experience working in manufacturing, a sector that has an extensive supply chain for raw materials and finished products. Not only did the business for which she worked have its own continuity plans, but so did its critical suppliers. She says partnership dialogue was critical to finding resolutions when there were disruptions and alternative suppliers needed to be sourced.

Any discussion also needs to consider that disruption will impact businesses in different ways – depending on their size and whether they are a supplier, an end-user or, in some cases, both. 

Professor David Walters from Cardiff Work Environment Research Centre at Cardiff University, who has co-written several IOSH reports, was part of a team that published a large review of OSH practices in micro and small firms for EU-OSHA in 2016 and how likely they are to respect OSH in the supply chain (EU-OSHA, 2016).

‘Decisions are often taken based on price and delivery considerations. If a company is promising to deliver and produce things as cheaply as possible then it’s likely they are going to cut corners and they are not going to do OSH properly,’ he warns.

‘The challenge for the OSH professional working with micro and small firms is how you can ensure that you are in the right place at the right time to contribute OSH advice and ensure that advice is adhered to by the micro and small firm?’

Challenging considerations

Angela notes that large operators face a growing list of upstream and downstream considerations. Those that sell on a product from a supplier have a duty of care to consumers and that means making sure they are safe and of a high standard. She adds: ‘There is such a diverse level of risk in your downstream supply chain that you really need to think it through at a top level.’

This means OSH professionals need to undertake a huge amount of due diligence to provide assurance businesses are working with the right partner, especially if the product falls into the high-risk category. She stresses that ‘picking your supply chain partners is critical to your business reputation’.

In addition to quality and safety, other ethical considerations can do real damage to a business if they fail to properly audit suppliers. The list is extensive, but includes modern slavery and poor work practices down the supply chain and sustainability issues such as guaranteeing products, and their component parts, are from legitimate sources.

This is where IOSH’s socially sustainable OSH model Catch the Wave comes in, encouraging businesses to understand the value of their human capital and set high standards for their workforce, communities and supply chains.

Angela says the importance of having strong strategic partnerships with critical suppliers is that these considerations can all be worked through together. Good procurement teams will also understand the frameworks behind the products being sourced.

Large operators face a growing list of upstream and downstream considerations

Even so, these teams will also be under immense pressure to secure the lowest price, and in this respect the relationship with the supplier must be mutually beneficial to avoid creating additional risks further downstream.

OSH’s role in supply chains

OSH professionals can have an important role in supply chains by ensuring practicable and thoroughly tested emergency plans are in place, says DHL’s Russell Clark. However, this does not translate into business continuity and resilience when a business faces an incident.

‘In reality, OSH professionals must thoroughly assess points of exposure, understanding a business in its entirety, including upstream and downstream supply chain interactions,’ he argues.

A growing number of OSH professionals in businesses are either taking on dual responsibility for emergency response and crisis management, or moving from one role to the other.

Jason Johnson, who has done the latter, warns that some individuals can become overwhelmed by the workload in a crisis situation. Although the OSH professional has the skills to do both roles, it requires adaptation, he argues. ‘You are gathering information like in a risk assessment, but unless you speak to the expert who deals with that area every day, your business impact analysis is not going to be accurate and your continuity plans are going to fail on day one.’

Training and guidelines

OSH professionals possess a suite of technical skills that they can draw on when risks are identified in the supply chain. Angela identifies areas in IOSH’s competency framework they can bring to the fore when a crisis emerges. One of the most important is demonstrating visible leadership.

‘They are not going to hear you if they don’t trust you. One of the competencies is being the trusted adviser, so that entire stakeholder management piece is really important because that is about your collaboration and negotiation skills.’

Image credit | Getty