The need to address global supply chain and transport risks is an urgent one, according to a report released at this week’s World Economic Forum in Davos.

The report, New Models for Addressing Supply Chain and Transport Risks, which was produced by the WEF in collaboration with Accenture, has called for an urgent review of risk management practices to keep pace with rapidly changing contingencies facing the supply chain, transport, aviation and travel sectors.

“We must continue to strengthen global supply chains to ensure that they operate effectively in time of crisis, recover quickly from disruptions and facilitate international trade and travel,” said US Homeland Security Secretary Janet Napolitano. “As part of this effort, we look forward to working closely with our international partners in the public and private sector to build a more secure and resilient global supply chain.”

According to the report, while trends such as globalisation, lean processes, mass travel and the geographical concentration of production have made supply chain and transport networks more efficient, they have also changed their risk profile.

It goes on to highlight how major recent disruptions have given stark examples of how risks outside the control of an organisation can have unintended consequences that cannot be mitigated by one organisation alone. These include:

• the global financial crisis;
• the Yemen parcel bomb scare;
• flooding in Thailand;
• and the Japanese earthquake and tsunami.

It seems that the supply chain and transport issue hasn’t been lost on the world’s business leaders, however, with 90% of the respondents to a WEF and Accenture survey indicating that supply chain and transport risk management has become a greater priority in their organisation over the past five years.

“General uncertainty in the global economy and the increasing sophistication of supply chains naturally breeds concern around network efficiency and vulnerability,” said Deutsche Post DHL CEO Frank Appel. “Our industries are working through the World Economic Forum’s Supply Chain & Transport Risk Initiative to understand and improve systemic resilience, for the benefit of business and society.”

“The World Economic Forum has identified opportunities for improving risk mitigation and building resilience across networks,” added the World Economic Forum’s Risk Response Network senior director Elaine Dezenski. “Global supply chain and transport networks form the backbone of the global economy, and the report is a call to action for the international community – business and government – to continue improving coordination and collaboration in order to effectively address these risks.”

Key findings

The report is based on input from executives participating in the WEF’s Industry Partnership programmes in automotive, aviation and logistics – as well as an interview series and survey involving leading academic, industry and government experts.

The significant threats to supply chains and transport networks that were identified include:

• natural disasters;
• conflict and political unrest;
• sudden demand shocks;
• export/import restrictions;
• and terrorism.

Also highlighted by the report were the vulnerabilities that undermine the resilience of networks. These include:

• reliance on oil;
• availability of shared information;
• fragmentation of value chains;
• extensive subcontracting;
• and lack of supplier visibility.

Some of the risk management tools identified by the report that need to be integrated into the broader strategic framework of organisations include:

• collaborative and trusted networks;
• effective risk legislation and incentivisation;
• appropriate data and information sharing;
• improved quantification metrics;
• and enhanced scenario planning.

CEOs meeting in Davos discussed five key recommendations for business and governments to enhance risk understanding and management:

• improve international and inter-agency compatibility of resilience standards and programmes;
• explicitly assess supply chain and transport risks as part of procurement, management and governance processes;
• develop trusted networks of suppliers, customers, competitors and governments focused on risk management;
• improve network risk visibility through two-way information sharing and collaborative development of standardised risk assessment and quantification tools;
• improve pre- and post-event communication on systemic disruptions.

The report can be read in full here.

More stories:

Encourage risk taking to drive growth

Fatigued new fathers pose OHS risk: study

Keep an eye on contractors or risk losing thousands