Don’t map your supply chain; first map your risk

Supply chains are complex, multi-tiered, global and ever changing. The idea of mapping a product supply chain down to raw commodities will send shivers down the spine of even the most experienced and well-informed procurement professional. It’s a massive, time consuming, resource intensive and almost impossible task for any organisation.

Mapping supplier risk helps prioritise resources

Mapping supplier risk helps prioritise resources

A more strategic and collaborative approach is needed. While some industry sectors in Australia are starting to pool resources and work collaboratively to assess extended supply chain risks (for example, property, aged care and health care) there is still a long way to go.

In the meantime, a good starting point for businesses wanting to act on this issue is to undertake high-level mapping of potential modern slavery risk within their supply chains. Understanding and mapping potential risk (be that modern slavery, health & safety, environmental or business risk) is an essential first step to prioritise limited resources so that the most salient risks can be addressed first.

It is useful to begin the risk assessment by analysing known risks of modern slavery associated with specific countries or regions, industry sectors and commodities. This can be based on existing publicly available information obtained from numerous reputable sources such as:

Check out our resource data base here

Deciding how extensive the supplier risk prioritisation needs to be - the eternal ‘how-far-do-you-go’ question - depends on key factors such as an entity’s risk appetite, capability, supplier relationships and available resources. Identifying which (or how many) suppliers or categories of supply to rank against modern slavery risk factors might be based on:

  • Percentage of total spend (for example, prioritising suppliers who make up 80% of total spend)

  • All suppliers over a certain spend amount (for example all suppliers over $1M)

  • Suppliers within a single, specific high-risk category (for example, all construction suppliers, or only the clinical supply chain within a hospital)

  • The top 50 to 100 suppliers based on spend plus additional perceived high-risk suppliers or categories; or

  • All suppliers across multiple potentially high-risk procurement categories (including construction, clothing, cleaning, security, electronics, fresh produce, labour hire etc).

It is important to remember that risk levels are not aligned to spend and that lower spend categories and suppliers may also have a high risk of modern slavery or worker exploitation.

Regardless of the approach taken, the most important aspect to supply chain risk identification and prioritisation is having a consistent and accurate procurement spend risk taxonomy. This should be developed in collaboration with procurement, risk and compliance, legal, operations and sustainability personnel. 

Our own procurement risk taxonomy continues to evolve and expand as we gain practical insights working closely with Australian and global businesses across an increasing diversity of industry sectors including health, education, mining, food & beverage, aged care, security and government.

Get in touch if you want to know more: sonja@sdstrategies.com.au

Sonja DuncanComment