The Ultimate Guide to Supply Chain Safety

What is Supply Chain Safety?

Supply chain safety refers to the practices and measures implemented to ensure a supply chain’s integrity, security, and efficiency from start to finish. It involves safeguarding every stage, from the procurement of raw materials through manufacturing and distribution to the final delivery of products to consumers.

It helps protect the company from financial and reputational risks while ensuring the safety and satisfaction of customers. Keeping supply chains secure is essential to avoid disruptions from natural disasters, cyber threats, geopolitical issues, or pandemics, which can seriously affect a company’s operations and profits as supply chains become more complex and global.

Importance of Supply Chain Safety

Ensuring safety at every stage of your supply chain is key to effectively managing supply chains, minimizing risks to your workforce, and securing overall business continuity.

The importance of supply chain safety can be seen in several ways, such as the following:

• Protect Worker Health and Safety: Workers face risks at every stage of the supply chain, including hazardous materials, accidents during production or transport, and unsafe working conditions. Keeping them safe reduces absences and makes your workplace more efficient and productive.

• Ensure Product Quality: Unsafe practices in the supply chain can lead to product defects or contamination. It risks consumer safety, harms your brand’s reputation, and can cause financial losses.

• Compliance with Regulations: Many industries have strict regulations to keep workers and consumers safe. Focusing on safety in your supply chain helps your business stay compliant and avoid legal issues.

• Meet Customer Expectations: In today’s market, consumers are becoming increasingly aware and concerned about the safety practices of companies they do business with. A safe and responsible supply chain helps meet customer expectations and build trust in your brand.

• Save Costs in the Long Run: Implementing safety measures in your supply chain may require an upfront investment, but it can save your business money over time. A safe and healthy work environment also boosts productivity and efficiency, saving long-term costs.

• Retain Employees: A safe and supportive working environment can also improve employee satisfaction and retention. Employees who feel valued and protected are more likely to be loyal to their company.

Different Risks in Supply Chain Operations

The 2024 Supply Chain Resilience Report from the Business Continuity Institute (BCI) reveals that almost 80 percent of organizations experienced at least one supply chain disruption last year. This data shows the increased need for stronger supply chain risk management to protect the operations and profitability of a company.

Some of these risks in supply chain operations include:

Operational Risks

Operational risks are potential disruptions to supply chain activities caused by internal process failures, equipment breakdowns, or human errors. Businesses that have not implemented digital solutions for Operational Risk Management (ORM) and Process Safety Management (PSM) are more exposed to these risks, which can hurt supply chain efficiency and overall operations.

Supplier Performance Risks

Overseeing supplier performance is one of the most demanding challenges in procurement. Late deliveries, poor-quality materials, rising costs, or unexpected shutdowns can have far-reaching impacts on supply chain resilience. These risks can lead to disruptions in production schedules, delays in customer deliveries, and declined customer satisfaction.

Cybersecurity Risks

As digital transformation accelerates, the risk of cyberattacks on supply chain systems is increasing rapidly. Recently, the FBI warned about hackers targeting critical infrastructure, such as power plants, electric grids, water treatment facilities, oil and gas pipelines, and transportation hubs. Additionally, a 2024 IBM survey reports that the average cost of a data breach has reached $4.88 million, marking a 10 percent increase and the highest amount recorded to date.

Environmental and Natural Risks

Natural disasters, extreme weather events, and other environmental factors can severely disrupt global supply chains. A 2024 Corporate Climate Adaptation survey by Marsh McLennan shows that 41 percent of organizations invest in asset engineering to withstand extreme events and reduce downtime. Being prepared ensures business continuity and minimizes the long-term impact of environmental disruptions.

Compliance and Ethical Risks

Due to regulations like the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive, businesses are under growing pressure to address their supply chains, greenhouse gas (GHG) emissions, plant maintenance, and process safety. Keeping up with these rules will challenge global supply chains as regulations and ethical standards evolve. A PwC UK CEO survey found that nearly half (47 percent) of respondents view regulatory changes as a risk to their business’s success.

How to Build a Strong Supply Chain Safety Program

Creating a strong supply chain safety program is crucial for any business looking to uphold ethical standards and comply with regulations. Here are some key steps you can take to build an effective supply chain safety program:

• Identify Potential Risks: The first step in building a strong supply chain safety program is to identify potential risks within your supply chain. It could include Environmental, Social, and Governance (ESG) risks such as labor violations, safety hazards, or environmental impact.

• Establish Clear Policies and Procedures: Once you have identified potential risks, it’s essential to establish clear policies and procedures for addressing them. You should outline how it will address issues and specify its actions in case of a violation.

• Monitor Suppliers Regularly: Establishing a comprehensive vendor due diligence process lays a solid foundation for maintaining safety standards throughout your supply chain. You can perform regular audits, site visits, and reviews of supplier performance metrics.

• Maintain a Crisis Management Plan: Even with the best safeguards in place, supply chain disruptions can occur unexpectedly, which is why a comprehensive crisis management plan is essential. Your plan should outline clear steps for responding to emergencies and minimizing the impact on operations.

• Invest in Supply Chain Safety Technology: Leveraging cutting-edge technology can help automate safety protocols and improve overall efficiency in monitoring and managing risks. For example, Mowi, the world’s largest producer of sustainable, farm-raised seafood, has invested in digital solutions to streamline inspections and deliver high-quality, sustainable salmon across the UK.