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White Paper

How Collaboration Reduces Your Global Supplier Risks


How Collaboration Reduces Your Global Supplier Risks

Table of Contents
Global Sourcing Increases Supply Chain Risks ..............................................................................3

Identifying Global Sourcing Risks ..................................................................................................3

Steering Clear of Risk ....................................................................................................................5

Benefiting from Collaboration ......................................................................................................6

Choosing the Right Solution .........................................................................................................7

Conclusion .....................................................................................................................................8

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How Collaboration Reduces Your Global Supplier Risks

Today’s global supply chains are increasingly complex and disruptions are a common occurrence. A current example is
the congestion that’s been plaguing U.S. West Coast ports for several months resulting in weeklong shipment delays.
These disruptions can be driven by a variety of events that include labor disputes, Customs delays, natural disasters
and other incidents. Following the March 2011 tsunami and earthquake in Japan, supply chains worldwide felt the
impact of this natural disaster as Japanese manufactured exports worldwide dropped dramatically. The lessons to be
learned from this natural disaster are still being analyzed by supply chain experts as a means of pre-empting further
and future ramifications from such a catastrophe.
Risk comes in many forms and the key to insulating your supply chain against costly delays, or failures, can be found
through software solutions and process changes. Instituting a robust collaborative software platform and consolidating
data from your external systems results in the ability to buffer your supply chain operations from all major risk factors.
While the examples throughout this whitepaper focus on the Retail industry, the issues, concepts and benefits of a
collaborative supplier network apply across industries.

Global Sourcing Increases Supply Chain Risks


Traditional retail supply chains were simple and carried less risk. Retailers in the “old days” would place orders with
national brands and rely on those brands to ensure the right product arrived at the right place and the right time.
However, if you are still relying on national brands to fill your shelves, your operations now need to guarantee the
stream of goods flow without interruption.
Today, private label brands comprise more of the share of products in your stores so many of the responsibilities have
shifted to your internal sourcing teams. Multiple sales channels (international sales, online, outlet stores, specialty, and
others) exist in the global retail environment, complicating the situation. The mix of private label, store brands and
national brands results in greater potential risks as your trading partner ecosystem expands to fill demand. Everything
you do is influenced by global sourcing issues and obstacles, compounding the level of risk to ensure the timely
delivery of orders and shipments.

Identifying Global Sourcing Risks


When it comes to managing the various forms and degrees of sourcing risks, there are challenges. You can find risks
across the global supply chain so it is important to limit the amount of risk before it becomes overwhelming. When we
talk about “risk” we really mean “disruptions.” These disruptions can be caused by everything from political unrest, to
extreme weather, or simply a lack of communication between your teams. The communication challenges can result
from simply speaking a different language based on geographic location or their respective roles within
the ecosystem.

Following the March 2011 tsunami and


earthquake in Japan, supply chains worldwide
felt the impact of this natural disaster as
Japanese manufactured exports worldwide
dropped dramatically.

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How Collaboration Reduces Your Global Supplier Risks

Industry experts agree that you can’t plan for every eventuality so you have to strive to identify and address the major
weaknesses. This is the first step; take a long hard look at your supply chain to determine what vulnerabilities might
exist. While risks vary by company and industry, some common sources that warrant scrutiny by sourcing professionals
to maintain the flow of goods include:
ƒƒ Environmental — These are risks that occur in the natural world, including “Acts of God”, human- related accidents
like fire or other disruptions to production that lead to other breakdowns. More recently, socio-political instability
plays a role as it places a strain on the people, economies and governments where sourcing is more prevalent.
ƒƒ Organizational — Organizational risks are classified as either external or internal. The external risks result from
outside pressures on the organization, such as political, economic, technological, sociological or cultural changes.
These changes create a negative influence on the goals of the company. Keep in mind that external organizational
risks include all of the partners in your trading network.
Internal risks can result from business processes or the management of information. In a recently published study,
nearly 70% of executives lack the information they need to manage effectively because employees withhold vital
input out of fear that doing otherwise will reflect poorly on them1. This is an example of internal organizational risk
based on information management.
ƒƒ Network-relational — Following the technology boom of the ‘90’s, the world became flat – a term often referred
to when describing the globalization of commerce and the shift required for countries, companies and individuals
to remain competitive in a global market where historical and geographical divisions became increasingly non-
existent. This shift brought with it the need for technology and people to build bigger “networks” to function
effectively. In turn, the amplified number of connections leads to the risks of breakdown in communication or
linkage. Likewise, technology itself brings risks; the physical failures to hardware and software that facilitates
communication, and the increased potential for intellectual property (IP) theft that leads to loss of exclusivity.2
When applying these risk types to the retail supply chain, we can easily see where the fractures might appear and
cause a major break. Given the number of countries retailers and brands typically source from and the expansive
distance between the production point and the point of sale, the threats of risk from the ecosystem is high. The nature
of doing business globally combined with the multi-tiered network of people and technology, complicate the situation
and create a difficult environment for managing global supply chain risks.

In a recently published study, nearly 70% of


executives lack the information they need
to manage effectively because employees
withhold vital input out of fear that doing
otherwise will reflect poorly on them.

1 Susan Feldman and Chris Sherman, (2010) “The High Cost of Not Finding Information”, p.1.
2 Uta Juttner, Helen Peck and Martin Christopher, (2003) “Supply Chain Risk Management: Outlining an Agenda for Future Research”,
International Journal of Logistics: Research and Applications, Vol.6, No.4, pp.199-213.

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How Collaboration Reduces Your Global Supplier Risks

Steering Clear of Risk


Despite increasing risk factors, many retailers are still closing their eyes, covering their heads and hoping nothing goes
wrong. According to a 2014 Reputation@Risk survey conducted by Forbes Insights, “a global survey of more than 300
executives found that 39% of companies rated the maturity of their reputation risk management programs as either
average or below average.” In addition, a 2014 report by the supply chain management faculty at the University of
Tennessee highlighted the fact that “despite recent unprecedented challenges, it appears that many supply chain
executives have done very little to formally manage supply chain risk.” To protect their corporate reputation and
maximize supply chain performance, executives need to mitigate their risks and make changes to the way they
have done business in the past.
Deciding on the best approach to reduce global supply chain risks has long been analyzed by supply chain
management professionals. A 2003 study, that still applies today, outlines the need to attack each source with
a well-defined strategy. The study identified four different methods to combat supply chain risk:
ƒƒ Avoidance — This is a reactive strategy utilized as an alternative to facing the risk head-on. In the retail ecosystem,
this method can be illustrated through the dropping of styles, not sourcing from certain geographic regions, or
shying away from suppliers that carry greater risk. Through avoidance, organizations are forced to withdraw from
producing specific items, products in certain geographic areas or particular suppliers to minimize potential
negative impacts.
ƒƒ Control — This method is one of the first used by retailers to minimize global supply chain disruptions and risks.
With this method, retailers “take control” of various risk events (regulations, quality issues, Customs delays, port
strikes, etc.) to reduce the severity or eliminate the negative impact on supply chain performance. First, technology
solutions create vertical integration to connect each layer in the trading party community with the retailer directly.
This provides the retailer with an early warning mechanism to proactively and cost-effectively address any issues.
Next, as a means to ensure product availability to meet the demand, inventory levels are reviewed to balance the
safety net with the capital investment. Lastly, by proactively managing excess capacity in production, handling or
transportation, the severity or likelihood of the risk can be reduced.
ƒƒ Collaboration — Most prevalent today, and by far the best-known method of risk management, is the use of
collaborative technology and processes. These efforts improve visibility and share risk-related information across
the entire supply chain. This method allows for risks to be spread out across the trading partner network as a
practical way of distributing the ability to control risks in the respective areas of each link in the supply chain.

“Despite recent unprecedented challenges,


it appears that many supply chain executives
have done very little to formally manage
supply chain risk.”
University of Tennessee
2014 Faculty Report

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How Collaboration Reduces Your Global Supplier Risks

ƒƒ Agility — Working in tandem with a collaborative risk management process, retailers can introduce agility to the
supply chain. This is where both proactive and reactive measures can be employed to contend with risk. Practices
like postponement, multi-sourcing, and supplier diversification provide choices for supply chain managers to delay
activities or select which suppliers they should source from to avoid possible threats.3
Each of these methods of risk management have merit, depending on the scenario, with the collaboration and agility
approaches providing the best overall response to managing risk in the retail supply chain. However, collaboration and
the agility that results from a group effort can only be achieved by involving suppliers at every level where significant
benefits can be achieved.
Previously, many companies did not explore effective collaboration with supply chain partners because of a lack of
trust. The traditional lack of trust and control prevented retailers from collaborating closely with suppliers, causing
friction and redundancy when both parties duplicated the same tasks. With the transparency of shared data and
mutual collaboration, retailers are more comfortable sharing responsibilities with suppliers. The recent trend to more
open and bi-lateral communication has made this challenge a non-issue. The trust factor is no longer a barrier for
developing and maintaining collaborative relationships and most retailers have dismissed this as a concern.4

Benefiting from Collaboration


Collaboration addresses supply chain risks by avoiding, controlling and evaluating all risk factors across the global
supply chain. This includes the entire product lifecycle where risk plays a role. The amount of risk you are capable
of minimizing is realized in distinctive ways during each point in the process. Examples where more collaborative
processes are a key to risk mitigation include:
ƒƒ Product Design and Development — Most retailers think collaborative product development practices only
take place between internal teams within a retail organization, with little interaction from the supplier or service
provider. However, by connecting with the factory early in the product development stage, you gain visibility and
set expectations with all of the parties involved. These ways of connecting with the factory include sharing forecasts
and plans with suppliers earlier in the lifecycle, seeking out innovative new material or products with raw material
suppliers, and by reserving capacity or taking a position on raw materials to ensure availability.
ƒƒ Production — Risk is minimized by unifying critical data that can be used to make decisions in a single solution,
increasing protection and decreasing impending production issues. With collaboration, your teams can mitigate
supply chain failures (whether political, economic, or environmental) by analyzing diversification across regions,
gaining snapshot views of work in progress and identifying potential production delays that might lead to concerns.

Collaboration addresses supply chain risks by


avoiding, controlling and evaluating all risk
factors across the global supply chain.

3 Ibid.
4 Adi Zukerman and Dave del Corral, “PLM 2,0: Achieving PLM’s Promised Value”, Apparel, April 10, 2012, 20.
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How Collaboration Reduces Your Global Supplier Risks

ƒƒ Logistics — Risk and agility are optimized through real-time visibility into global logistics activities providing the
ability to quickly react to demand changes and unexpected disruptions. Also, with increased visibility you can make
order and shipment modifications quickly to dodge any incoming obstacles and improve reaction time to customer
changes. The shared visibility and collaboration gives suppliers, at each tier, insight into possible dropped styles or
order postponements – all leading to a more nimble and responsive supply chain.

Choosing the Right Solution


Retailers, brands and suppliers face risk at every turn in today’s complex global supply chains. With increasing
globalization, more and more retailers and brands are doing business with partners outside of their traditional comfort
zones. Agility and collaboration are essential to mitigating risk when dealing with customers, factories, and other key
parties in different languages and time zones.
In order to maximize global supply chain performance and reduce risk, retailers and brands need to implement a
platform that facilitates collaboration and shares information across the retail ecosystem. The technology solution
needed to facilitate this method of supply chain management must have the ability to collect timely, accurate and
network-based data (real-time or near-real time) that can guide fact-based, timely supply chain decisions.
According to data from Gartner and ARC research, over the past decade companies have collectively spent billions of
dollars on PDM, ERP, TMS, WMS and other “big data” systems. In order to effectively use the information from these
existing applications, a new class of software needs to be implemented. Gartner states that a growing percentage
of enterprises will rethink their supply chain execution software portfolios, and adopt cross-functional platforms that
support true integrated, end-to-end business processes.5
By leveraging solutions that collect and share information from multiple technology sources and service providers, it
is easier for organizations to access information across supply chain trading partners and reduce global supply chain
risks. More importantly, this collaboration can include suppliers across every tier of the supply chain. This gives the
retailer the ability to better manage the supply stream by accurately analyzing the various options to reduce global
sourcing risks.

Agility and collaboration are essential to


mitigating risk when dealing with customers,
factories, and other key parties in different
languages and time zones.

5 Janet Suleski & Lucie Draper, “Sourcing Maturity: Finding the Path to Sourcing and PLM Integration Excellence”, Apparel, Nov. 22,
2011, pp. 15-18.
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How Collaboration Reduces Your Global Supplier Risks

Conclusion
Global sourcing has complicated retail supply chains with an array of risks and variables that must be managed, both
proactively and reactively, to avoid disruptions like quality issues, shipment delays, product shortages, excessive
expediting costs and others.
In order to minimize supply chain risks, you need to implement processes and technology that identify the risks, utilize
the best approach to reduce each type of risk, analyze future risks, and collaborate with supply chain trading partners
to react before, during and after disruptions.

A growing percentage of enterprises will


rethink their supply chain execution software
portfolios, and adopt cross-functional
platforms that support true integrated, end-
to-end business processes.

About Amber Road


Amber Road’s (NYSE: AMBR) mission is to dramatically improve the way companies manage their international
supply chains and conduct global trade. As a leading provider of cloud-based global trade management (GTM)
solutions, we automate and optimize the supply chain functions required to import and export goods. This includes
collaborating with foreign suppliers on design and quality assurance; executing import and export compliance checks
and generating international shipping documentation; booking international carriers and tracking goods as they
move around the world; and minimizing the associated duties through preferential trade agreements and foreign
trade zones. Our solution combines enterprise-class software, trade content sourced from government agencies and
transportation providers in 145 countries, and a global supply chain network and collaboration platform connecting
our customers with their trading partners, including suppliers, freight forwarders, customs brokers and transportation
carriers. We deliver our GTM solution using a Software-as-a-Service (SaaS) model and leverage a highly flexible
technology framework to quickly and efficiently meet our customers’ unique requirements around the world.

One Meadowlands Plaza · East Rutherford, NJ 07073 · (T) 201 935 8588 · (F) 201 935 5187 · Solutions@AmberRoad.com · www.AmberRoad.com

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