In the infrastructure, government and healthcare sectors, one of the biggest challenges faced during the COVID-19 pandemic has been maintaining supply chains to deliver critical public services. While issues around access to personal protective equipment (PPE) and vaccines have made headlines, there have been other complexities behind the scenes.
For CEOs, these complexities are no doubt one of the reasons the supply chain has jumped to third place as a key risk to growth in the latest KPMG 2021 CEO Outlook Pulse Survey – up from eighth place in our August 2020 survey.
As we’ve seen from the recent incident in the Suez Canal, where an issue with a single vehicle caused widespread disruption, the importance of scenario modelling, contingency planning and supply chain visibility is here to stay. Having visibility and a macro view across your supply chain will be key to managing businesses future risk.
The importance of visibility and a macro view
Having a macro view means being able to see exactly where your goods and services are coming from, the journey they are taking, and other factors such as costs and potential risks.
However, the experiences of the past year revealed that at a time when organisations really needed this visibility of their entire supply chain, many didn’t have the technology tools to deliver it. In infrastructure, government or healthcare, a macro view is not always easy to achieve as the structure of departments and arm’s-length bodies means information about procurement and suppliers is often not connected. While some organisations might have a good understanding of their tier one and two suppliers and the aligned risks, they may have limited awareness of this at tier three, four or five levels.
The right supply chain technology can deliver this view, and can be trained to raise flags about, for example, the top potential risks to escalate and be managed. Supply chain technology can also help to remove inefficiencies, show up financial opportunities, and deliver data for better decision making.
Modeling risk scenarios
Another benefit of having a macro view is being able to model risk scenarios, see alternative solutions, and even predict future issues. The modeling helps you to ask – what if there's a typhoon that disrupts trade flows? What if another massive cargo ship blocks access through the Suez Canal?
It can also help you see where you have too much reliance on a single contractor or region. What if that supplier fails? Do we need to focus on working with more domestic suppliers to spread the risk? This can seem counterintuitive to the usual focus on consolidation, but is an important part of balancing risk.
ESG in focus
The KPMG 2021 CEO Outlook Pulse Survey also revealed that 49 percent of CEOs are looking to implement more stringent Environmental, Social and Governance (ESG) agendas in the year ahead – a focus enhanced by the upcoming COP26 event in Glasgow. This is good to see, as in the healthcare and infrastructure sectors, the sustainability and provenance of goods is of increasing importance as they look to lead by example.
Again, this is where a macro view over the supply chain helps, as it can reveal product origins, air miles, factory standards, carbon emissions and more. This visibility also helps to answer questions such as, are our suppliers fit for purpose? Are there human rights issues hidden in our supplier base?
The right tools can also add the ability to have greater transparency over how supplier contracts are awarded, which can help to prevent any reputational risks.
Supply chain concerns will continue to be central to infrastructure, government and healthcare organisations. Looking ahead, here are three things executive teams can think about to help:
- Embrace technology, as there are some really good tools out there that can bring visibility from the front to the middle to the back of the supply chain, and help you see the risks. In the past, a barrier to implementing this technology may have been cost, however new solutions are increasingly cost effective and simple to put in place.
- Get on top of ESG, ask the right questions, and make changes to your supplier base if necessary. A light touch carbon emission reduction plan, or cutting plastic bag use won’t be enough to satisfy today’s customers and stakeholders.
- The Suez Canal cargo ship incident wasn’t on anyone’s minds a week before it happened; COVID-19 wasn’t a concern the week before it spread. Ask, what disruption could come next, and is your supply chain ready?