Using risk to prioritise supply chain investigation

How can you know the unknowable? Tim Wilson introduces the concept of risk mapping in complex supply chains.

Many supply chains are unknown and increasingly complex, and discovering the unknown is time-consuming and can be expensive to do. However, reputation and legislation is making it something that brands and retailers can no longer ignore.

Jeff Williams, Apple’s Chief Operating Officer, recently said that the company spent more than 5 years, exploring, sending emails, making phone calls, and getting on aeroplanes, to fully audit its supply chain for conflict minerals.

Knowing where products were made, from raw materials to finished goods, allows brands to do it better, faster and with lower impact. Crucially, in this age of transparency it also allows them to talk knowledgeably about it to regulators, to consumers, to the media.

But where to start? It is a great idea to be able to map all the connecting places in the world where processes are carried out to transform raw materials into finished goods. However, even if someone visited all those places today, they might find organisations that are still making similar product, such as yarn spinning or fabric manufacture, but not necessarily making inputs for their finished product. The work for that was done weeks, months or possibly even years ago and the factory probably had no idea which consumer products their goods would be manufactured into.

Supply chain maps therefore tend to be specific to a product, and for brands interested in mapping beyond the final product manufacturing stage, they are frequently specific to an order or a delivery of that product.

So what does that mean for the many organisations that have hundreds, possibly even thousands of products in their portfolio, each one the result of a complex global supply chain, each using an array of raw materials and every one of them capable of various environmental and social impacts; both positive and negative?

One option is the increasingly admired concept of risk. Many organisations are aware that there might be issues at some point in their supply chain, but they don’t know which chain, and where to look, or have the necessary resources as outlined above to research them all. This is where probability comes in. Which are the most likely processes, the most likely raw materials, and the most likely regions in the world that could be an issue?

It is possible to map risk for a host of materials and issues, from the risk of modern slavery to areas of high and low water stress. By combining data and weighting it, it is possible to highlight the areas where the risk of certain things happening is highest.

For example, if products include timber fibres (this includes viscose in the apparel industry), it is important to know where in the world the risk of illegal harvesting of trees is high. These regions tend to be where there are large forests, relatively weak environmental regulation, and ineffective law enforcement.

By obtaining information about the countries in which materials were processed for a representative sample of products, and combining it with this risk data, it becomes possible to estimate risk exposure. The low risk can be ignored, the high risk investigated in more detail and a rationale for logical engagement with an apparently intractable problem provided.

Tim Wilson, co-founder and director of Historic Futures, is an expert in value-chain mapping, product integrity, traceability and supply chain risk monitoring. Historic Futures recently launched an online supply chain risk monitoring tool, www.getstring3.com, which enables organisations to obtain data about how and where their products were made.