Many service providers tune out talk about supply chain risk management since they think the issue only affects manufacturers and retailers. In fact, service providers are also vulnerable to vendor disruptions and should respond accordingly.
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Over the past year, problems with the global supply chain have been a regular feature of the news. In March 2021, the container ship Ever Given blocked the Suez Canal for six days, obstructing a major shipping route and sending tremors through the global supply network. More recently, problems associated with the Covid-19 pandemic have caused shipping delays, port backups, and goods shortages.
The most vivid symbol of this issue is the shipping container, usually pictured in tall stacks on a ship cooling its heels outside a port or at a container yard where it is sitting in limbo.
These images illustrate a reality: the system for moving physical goods and commodities around the world is experiencing problems. However, they have also fueled complacency in a sector of the business world that operates at a distance from the physical world of manufacturing products and retailing them to consumers.
The companies that make up the service sector, the largest sector of the economy, have so far demonstrated a consistent attitude toward the “supply chain crunch”: “Not my problem.”
Most service providers seem to think that because they do not buy, make, or sell large amounts of physical goods, the supply chain crunch does not concern them. However, service providers can also be impacted by disruptions in their network of third-party vendors.
All service providers have third-party vendors. Some of those third-party vendors sell them physical goods (e.g., computers, vehicles, hand sanitizer) and some sell them services (e.g., technology, payroll, tax, security). To the extent that the service provider depends on the products or services provided by a third-party vendor to carry out its mission-critical activities, it inherits the vendor’s risk.
Service companies are often more vulnerable to vendor disruption than they think.
Once they start to investigate the matter, many service providers discover they have significant vendor vulnerabilities.
In recent months, the computer chip shortage and rising vehicle prices, in particular, have had an impact on many service providers.
None of this is to say that the sky is falling. However, it is recommended that service providers take the following basic steps to secure their supply chains:
Following these steps can take a service provider from a position of wishful thinking about their supply chain to one of definite knowledge and true resiliency.
Service providers often assume that the supply chain crunch is one problem they do not have to worry about. This is wishful thinking. To the extent they depend on goods or services from third-party vendors to carry out their mission-critical operations, service providers are potentially vulnerable to disruptions in their supply chains.
To achieve true third-party resiliency, service providers should identify their critical vendors, assess their threats and resilience, and implement appropriate mitigation strategies.
For more information on supply chain risk management and other hot topics in BC and IT disaster recovery, check out these recent posts from MHA Consulting and BCMMETRICS: