image , customer relationships , brand image and ultimately the bottom line .
Observed digital trends , cloud computing technology and other innovations continue to impact global supply chains . Consequently , supply chain leaders must build organizations that can withstand these significant and fast changing worlds . The impact of digitization can be argued as the single largest threat in the logistics industry , which will easily drive industry wide talent-shortage . This will get to crisis levels if no timely adjustments are made . There is a shift in critical skills required in supply chain . A skilled talent shortage is one of the top external forces impacting supply management .
One more perspective to keep a close watch on is supplier performance - most importantly the risk of non-performance by suppliers . This is now very critical as companies focus on lean supply chains and effective last-mile delivery . Shorter delivery times have become the norm in advancing supply chains . A failure of a supplier to perform is a huge risk . Disruptions in the supply chain may include events like factory failure , factory fires , trade union actions - ( e . g . leading to withdrawal of labour for drivers and distribution-center workers ), bankruptcies and technology failure . These problems have heightened the impacts of supplier performance risks on global corporations both financially and operationally .
Increasingly , the world is now faced with natural resource shortages . There is a growing demand for these limited and scarce resources . There is a predicted threat of potential future shortages of natural resources like water , oil , natural gas , phosphorus and rare earth minerals like scandium and terbium . Key questions are bound to re-orient focus on possible alternatives that can be used to replace these natural resources and protect the natural environment .
Corporations now have to cope with demands for managing sustainability , environment protection and resuscitation across the supply chains . This can never be ignored . Climate change and natural disasters have become more of a norm . These include catastrophic weather events . These changes and events impact infrastructure and disrupts logistics , suppliers and customers .
While some gains have been made in predicting the occurrences , the impact might not be accurately predicted , and the negative impacts significantly affect entire supply chains . Examples of these disasters include global warming , hurricanes , wild fires which have become a constant phenomenon , leading to losses estimated in billions of dollars .
Natural disasters have impacted global supply chains and reshaped cross industry precautions . The precautions include decisions to take very expensive insurance covers as well as choices of location for business . Many corporations have identified a need for improved collaboration and operational planning with business entities and governments , across entire supply chains . We have seen trends where logistics industry players now collaborate to increase footprint in different geographies through industry networks . In other industries like banking , the players have joined efforts to mitigate rampant risks of cybersecurity .
Financial risks will continue to affect the effectiveness of supply chains . It is very evident now that most corporations have to deal with foreign currency fluctuation risk , where imports have to be settled in foreign currency in the wake of depreciating local currencies . The question is whether the US dollar will still continue to hold as the preferred currency and means of exchange for value traded in international markets . For net importers , the unstable exchange rates result to direct cost and expenses passed on in the supply chain .
Financial risks go beyond corporations ’ boundaries and territories . The stability of the financial institutions facilitating international trade is a key factor that supply chain professionals have to cope with . Any financial failure of a supplier , or even a supplier ’ s supplier , will definitely cause restlessness to the supply chain executive .
We cannot have this conversation about being restless without touching on political risks . This discussion would be incomplete . The everchanging politics of domestic and foreign countries will continue to impact supply chains . Among political activities that have direct impact on supply chains include customs and border control scrutiny , inspection , and the payment of all necessary taxes , duties , and tariffs . These can be as unstable as the political regime in place in any country .
On the scale of the most important drivers of restlessness , the supply chain managers must include clarity of the supply chain scope and activities . Supply chain scope is defined as the specific activity required to fulfil a given term or obligation within a contract or other service-level agreement . This means the scope covered in a shipment and contract obligations .
Any interruption to the planned flow of activities within the supply chain scope can result in delays and crystallising of penalty obligations . The delays would even trigger additional supply chain processes , such as free shipping the shipment , to fulfil what was set out in the original contract .
A good supply chain risk management process will always have in-built sensitivity and scenario planning . This would simulate the “ what-if ” scenarios in each of those scope areas and help prepare likely responses ( e . g ., continuity of business plans ) should such risks materialise . It is clear that not every possible risk can be identified .
However , exercising risk response and mitigation plans in each of those areas will ensure that managers are better equipped to deal with situations , even if those situations are different from those involved in the simulation . Thinking ahead on potential problems is key in solving the problems when they occur . It is always better to be prepared than to be caught in trouble when risks occur .
Restlessness is good ! No great supply chain executive can afford to rest . This also defines agility . It drives the right behaviours . Always think about how the supply chain will be disrupted . This is the only certain thing we know .
The supply chain will continuously be disrupted . Take the preventive pill - prepare and prepare , simulate and again re-simulate stuff . Get to know risks .
Michael Nzule is the Finance & Strategy Director at Mitchell Cotts Freight Kenya Limited . He holds an MBA in Accounting with specialization in Marketing , and a Bachelors of Commerce ( Accounting Option Hons ) from the University of Nairobi . He ’ s a member of the Institute of Certified Public Accountants of Kenya ( ICPAK ). Views expressed in here-in are personal . You can commune with him via mail at : Mikemaithyanz @ gmail . com .