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Critical Considerations for Managing Risk in the Digital Supply Chain

This is our monthly blog featuring George Bailey, the Managing Director of the Digital Supply Chain Institute (DSCI) interviewing a series of supply chain leaders from around the world.

George is on the Advisory Board of Lockheed Martin and the American Productivity and Quality Center. He is the Executive Professor of Digital Innovation and Management at Pepperdine University and the Chairman of the Jackson Hole Ocean Sailing Team. George was based in Tokyo as Sony’s Chief Transformation Officer reporting to Chairman Sir Howard Stringer.  He was previously a member of IBM’s leadership team and the global lead for the PriceWaterhouse Strategy Change business.

“Today I am lucky enough to interview a good friend and colleague, Craig Moss. Craig is the Director of CGE’s Digital Supply Chain Institute (DSCI) and Chief Operating Officer of the Center for Responsible Enterprise and Trade (CREATe.org), an organization that helps companies prevent piracy, counterfeiting, trade secret theft, and corruption. Craig is also an Executive Advisor to Social Accountability International (SAI) where he has led numerous programs helping Fortune 500 companies implement improved supply chain sustainability practices.”

Welcome to STOKED! Craig, Why is supply chain risk management becoming more important than ever?

Everything changes faster today in business – Technology, Regulations, Buyer behavior, and Business models, and supply chain is at the heart of the change. As the rate of change accelerates, companies face more strategic decisions in a shorter period of time. Understanding how individual decisions impact the entire company is critical. Sophisticated supply chain executives have tremendous visibility into all of the company’s critical functions and the company’s position in the value chain.”

What is the impact on managing risk as a company transforms to a Digital Supply Chain?

The Digital Supply Chain enhances the capacity to see and address risks, but it requires a proactive approach. Technology will provide a company with more visibility. There will be greater visibility around business performance and compliance-related data, which can improve a company's ability to predict risks and incidents. Yet the transition to a Digital Supply Chain is clearly going to increase risks related to cybersecurity and protecting intellectual property (IP). The proliferation of data moving across platforms and among parties requires a new and different kind of “umbrella of trust” so that agility and performance can be optimized. But how is this trust built and maintained?  How does one trust, but verify? These are the management challenges and opportunities ahead, and they all exist in an environment marked by escalating cybersecurity risk. Further, the rise in critical intellectual property (IP) being stored and shared digitally also puts confidential information, trade secrets and personally identifiable information at risk. These vulnerabilities present an even greater need for rigorous and transparent risk management that incorporates cybersecurity.”

There is a lot of talks now about AI. Do you think AI will make a significant impact?

AI will have an enormous impact in managing virtually every type of supply chain risk. Let’s look at the business performance risk of not being able to meet demand. In the recent survey conducted by DSCI, 88% of respondents agreed that the use of AI would improve risk management programs to be more predictive and preventive in managing demand. This will reduce the risk of not having the right product in the right place at the right time.”

What should senior supply chain executives be aware of when they plan to use AI in supply chain risk management?

Fundamentally, the effective use of AI and the enormous amount of data available will unlock the potential for your company to evolve from reactive to predictive. Companies will be able to anticipate future demand and predict the likelihood of future risks. However, effective use of AI will require a cross-functional team of people to manage it. People to ask the right questions, define the right problems and perhaps, most important, use their judgment. One important application that will be improved is supply chain visibility. Today, companies frequently do not have a clear view of their customer’s current and future needs. This is especially true of the needs of their customer’s customer. Similarly, most companies lack a clear view of their suppliers and their supplier’s supplier. As a result, market opportunities are missed, and inventory problems occur. The lack of visibility also increases compliance and regulatory risk. Companies are aggressively using technology to increase visibility in their end-to-end supply chain. Blockchain could play a valuable role in building trust and increasing visibility. But increased visibility means that companies will be deluged with even more data at a time when many companies are already drowning in data. AI will enable companies to use data far more effectively, leading to faster decision-making.”

Is there one critical message you want to communicate to senior management as they think about risk management?

The Digital Supply Chain will provide new, more sophisticated ways to identify risks. Big data will create early warning systems allowing companies to become more proactive and preventative. The big news is that companies will be able to go beyond risk mitigation and compliance to turn risk management into a competitive advantage by outperforming other companies in a targeted area. Think about a credit card company known for exceptional practices in cybersecurity and protecting confidential information. Think about a buyer-supplier platform company known for creating trust through exceptional governance. Your company will be able to gain a competitive advantage through excellence in risk management. Your management challenge is determining where to mitigate risks and where to excel and gain a competitive advantage.”

Thank you, Craig Moss. I am STOKED about how AI/ML can help companies manage risk!