What Is Supply Chain Security and How Does It Work?
The 4,000-mile-long Silk Road transported silk, grains, and other goods from China to Palmira. Although the Pax Mongolica protected the Silk Road against pirates, bandits, and internal theft, merchants remained well-armed and depended on the safety afforded by traveling in large caravans and strategically placed small fortresses.
Why Is Supply Chain Security Important?
Modern supply chain security faces some of the same challenges witnessed along the Silk Road — albeit in a different form. The modern supply chain, which stretches from component suppliers to system builders and to the retail outlet, connects to points worldwide, features an ever-changing threat landscape, and functions through uncertainty compounded by climate change and global instability. Disruptions caused by a wide range of threats induce ripples throughout global economies and often lead to inflation and recession. When customers can no longer obtain what they need and when they need it, prices increase and then increase again.
What Is Supply Chain Security?
Avoiding supply interruptions requires a multifaceted supply chain security plan. Supply chain security seeks to mitigate the risks surrounding logistics, transportation, and transactions with external suppliers and vendors. Unfortunately, this nice one-sentence definition of supply chain security does not define the coordination required to detect and mitigate internal and external physical and cyber threats to a complex supply chain that may have multiple entry points.
Physical Threats to the Supply Chain Require Coordinated Actions
Today, physical attacks from both the inside and outside confront the supply chain. Modern supply chain security against these physical threats requires a coordinated approach. The importance of mitigating and eliminating physical threat opportunities flows full circle. That is, attackers can exploit gaps in physical security to discover vulnerabilities in the virtual walls of cybersecurity.
Internal Employee Screening
Screening permanent staff and third-party employees are the first steps toward preventing insider theft. Best practices for screening include reviews of employee histories, credit checks, criminal background checks, and drug testing. Screening also involves assurance that every employee complies with cybersecurity rules and procedures.
Supplier Qualification
Supplier qualification programs include vendor approval and material qualification. The vendor approval process uses evidence to show that the supplier complies with Good Manufacturing Practice (GMP) requirements for the industry and any regulatory requirements. A vendor approval process may involve the following:
- A paper audit
- On-site audits
- Review of supplier technical data
- Preliminary certificate of analysis (COA) verification
- The completion of GMP questionnaires.
- Third-party certifications
Material qualification includes verification of the supplier COA and testing of material quality.
Supply Chain Audits
Your organization can use ongoing audits to review and challenge the supply chain’s processes. With an emphasis on continuous improvement, a supply chain audit pushes suppliers to control costs and risks while showing the extent of performance damage caused by small and large disruptions. Every supply chain audit relies on standardized criteria and a plan for reviewing, communicating, and following up on actionable insights.
Standardized Inspections
The need for quality control drives excellence in supply chain operations. Inspections conducted at different stages of the supply chain process guarantee that products meet requirements and specifications and that a product’s quality aligns with the supply chain’s standards and rules. Typical supply chain inspections cover pre-production, production, pre-shipment, and the loading and unloading of containers.
Smart Technologies Prevent Cargo Loss
Many devices and technologies combine to prevent cargo loss caused by theft or environmental conditions. Integration between the IoT and artificial intelligence-drive devices allows condition monitoring and real-time analysis and decision-making. IoT-connected devices allow shipment and fleet tracking, inventory level maintenance, and data sharing between departments.
New smart technologies used cargo locks provide real-time notifications about damage attempts or brute force to break into cargo containers. Companies can program and monitor cargo locks from remote locations.
Cellular triangulation and GPS sensors allow companies to monitor in real-time the location and positioning of containers and any activities that may impact a lock. Additional sensors also measure environmental factors that may damage foods, pharmaceuticals, electronic devices, and other cargo, including temperature, humidity, shock, and tilt angle.
Cyberattacks Can Take a Supply Chain Down
Without proper planning and actions, the risk of cyberintrusion remains high for any part of the supply chain. Vulnerabilities can exist within maintenance and janitorial, sourcing, vendor management, engineering, and transportation. Using a zero trust approach works from the premise that a breach in any part of a supply chain will happen. Organizations can protect the supply chain from cyberattacks. Implementing a zero trust architecture involves anticipating and mitigating an attacker’s ability to exploit information. In addition, zero trust for the supply chain includes full employee participation and compliance with best cybersecurity practices.
Risk mitigation also covers access to controls and data. Organizations should consistently review procedures for storing and protecting data. Quality assurance at all levels of cyber activity may include minimizing access to sensitive data, building robust vulnerability identification and protection procedures, and implementing strict data retention regulations.
Managing the cybersecurity risk also involves verifying software and hardware purchased from suppliers as well as the qualifications of suppliers. Because compromised computer hardware often contains malicious code or embedded malware, companies must review hardware purchases and the software and hardware design processes. Gaining security through the supply chain involves including security requirements in every contract and RFP.
Resilience and Agility Define the Future of Supply Chain Security
Companies can improve the supply chain’s resilience by taking strategic steps that protect production and reduce supplier vulnerabilities. A proactive approach complemented by predictive analytics and other technology tools can allow companies to reroute inventories effectively, stabilize labor demands, and limit sales declines. In addition, companies should analyze supply chain vulnerabilities, understand that weak points exist, and prioritize mitigation plans and responses to risks.
Because of the impact of information technologies, consumers often react to world events — or pandemics — and almost immediately impact the supply chain. The sudden impact can and has created gaps in supply chain security. Organizations should recognize that managing supply chain security may require new management structures to offset these challenges. Management and security teams require the ability to respond quickly to demand volatility and any possible vulnerabilities that occur because of the volatility.