What the Supply Chain Executive Order Means - and What to Do Now

THE RESILIENT ENTERPRISE I THE RISKMETHODS BLOG

The U.S. government and White House are concluding their initial 100-day supply chain review. Here are eight great best practices that you and your team can deploy now. Get ahead of potential seismic shifts coming to your supply chains.

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Table of Contents

  1. What is E.O. 14017?
  2. What Does E.O. 14017 Mean to Your Business?
  3. Eight Things You Can Do Now

    • Place supply chain risk management at the heart of all you do
    • Capitalize on your risk intelligence capabilities
    • Gain a holistic view of your supply chain risk
    • Transition to real-time monitoring
    • Assess your supplier criticality
    • Move beyond reactive to proactive
    • Digitize and collaborate to gain a total view of risk
    • Hope for the best, but plan for the worst

  4. Why You Should Act Now

1. What is E.O. 14017?

On February 24, President Biden issued Executive Order 14017: Securing America’s Supply Chains. This mandates a pair of government-led supply-chain reviews. Industries deemed critical to America’s economic and national security include agriculture, defense, energy, IT, minerals and mining, public health, and transportation.

There is an initial 100-day review of four critical supply chains, along with a year-long review of six larger industrial sectors. Following each review, department leaders will provide their findings to economic and national security officials at the White House. They will then provide their recommendations on how to strengthen America’s critical supply chains to the President for his consideration.

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2. What Does E.O. 14017 Mean to Your Business?

As the initial review concludes, public and private-sector procurement and supply chain organizations ought to prepare for potential legislative, policy, or regulatory changes. If enacted, they will likely add complexity and cost to their governance, risk management, and compliance efforts. Indeed, bi-partisan legislation in the U.S. Senate is aimed at strengthening U.S. manufacturing and supply chains. Any new regulations can also have far-reaching consequences for companies that deliver to or procure from the U.S. industries involved.

And President Biden’s Infrastructure bill and 2022 federal budget proposal include multi-billion-dollar provisions to drive supply chain visibility and resilience. But hyper-partisanship and Congressional gridlock may mean that we’re months, maybe years, away from seeing tangible, meaningful impacts to the private sector.

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3. Eight Things You Can Do Now

We cannot yet say what will emerge from E.O. 14017. We can say that the private sector shouldn’t wait for the government to transform their supply chain risk management (SCRM) operations. They shouldn’t wait for the government to gain greater visibility into their supply chains. They shouldn’t wait for the government to drive supply chain resilience.

And they shouldn't wait for the government to tell them to do it, either. Thus, we offer our recommendations to procurement and supply chain professionals who are trying to operationalize E.O. 14017 and get ahead of it. Start now – thank us later.

  • Place SCRM at the heart of your procurement, sourcing, and supply chain programs

Build a level of redundancy and resilience into supply chains. Centralize risk management within your sourcing, procurement, and supply chain operations. This strategy will better enable you to plan for and mitigate risks. Inspect your category/commodity level, supplier levels, and the logistical sphere. Integrate risk management into the source-to-pay process. Extend SCRM processes and systems into the digital supply chain. Make SCRM a must have, not a nice-to-have. Those days are gone.

  • Capitalize on your risk intelligence capabilities

Digital SCRM enables you to do all sorts of cool things. You can use it to automate data collection to reduce end-user touch points. Leverage artificial intelligence (AI), big data analytics, and risk mapping to analyze and visualize risk intelligence. Digitized SCRM drives a single source of truth across business units, which is crucial for aligning on risk exposure from multiple vantage points.

  • Gain a holistic, end-to-end view of your supply chain risk

In the COVID-19 era, your supply chain risk exposure doesn't end with your suppliers or vendors. It extends into sub-tiers, where most risk events occur, into your service providers. It includes logistics hubs, such as airports, seaports, and strategic maritime passageways. Risk also seeps into your customer base in the form of reputational risk. If left undiscovered and unaddressed, this can harm your brand. Gain visibility into your entire value chain – suppliers, vendors, logistics, ports, and third parties. Then you can assess the risks and prioritize those you cannot afford to absorb above those you can.

  • Transition to real-time monitoring and continuous assessment

A big part of being resilient means having fair warning of impending risk events. Whereas current information is power, risk intelligence is strategic advantage. Accordingly, we advise you to stop relying only on initial, bi-annual, or annual supplier risk assessments. They’re highly tactical and quickly out-of-date. Instead, leverage real-time and continuous monitoring of suppliers, supply chains, and third parties and strive to become a forewarned, agile, and resilient enterprise.

  • Assess your supplier criticality to the business and prioritize on them

Many OEMs have thousands of suppliers, with varying degrees of criticality. Prioritize vendors and suppliers that are strategic or most critical for business continuity. Build supplier and part redundancy for the most critical suppliers and parts. Understand what parts or services are sole-sourced and line up alternative sources – preferably in different markets. Build or expand your inventories for safety stock. And know whether those parts or commodities are interchangeable.

  • Move beyond reflective and reactive to predictive and proactive

We can (and do!) learn a lot from historical risk data and intelligence, including seasonal patterns, supplier behaviors, and probabilities of impact. Assemble that data to model risk events and outcomes to help your team move from reflective to predictive, and from reactive to proactive. Use real-time data to derive early-warning indicators that may signal an impending risk event. Act before the risk gets ahead of your team.

  • Combine digital solutions and collaborative relationships to gain a total view of risk

Supply chain risk management is a team sport: fill your bench with lots of talent and modern gear to compete and win. Take a page from the U.S. government’s post-9/11 playbook and transition from a “need to know” to a “need to share” posture. Build relationships with internal stakeholders, as well as your suppliers, vendors, regulators, and other third parties. Enable them with a digital, automated SCRM solution (hint: we think ours are pretty neat). Consider establishing a cross-functional, inter-disciplinary risk management team. Then leverage your supplier relationships and digital tools to dive into the n-tier, gain a total view of risk, and drive compliance.

  • Hope for the best, but plan for the worst

Bad things will inevitably occur. It’s whether you can see it coming and whether and how you prepare for it that matters the most. To these ends, we recommend that you build supplier-risk profiles and model risk-event scenarios now to understand vulnerabilities. Conduct table-top exercises of various probability/impact scenarios (e.g., low probability/high impact – a pandemic, a canal blockage). And develop off-the-shelf business continuity plans for when the improbable becomes the inevitable.

4. Why You Should Act Now

Global, lean sourcing and procurement strategies, such as low-cost-country sourcing, drop-shipping, and just-in-time delivery, may have enabled business operations to thrive pre-pandemic. But will they survive the post-pandemic world that is becoming more volatile, uncertain, complex, and ambiguous – not less? Indeed, the next global supply chain crisis may cripple lean manufacturing operations. Are your supply chains redundant and resilient enough for the 21st century? Whether or not you think they are. And whether or not the Biden Administration will mandate sweeping industrial changes, now is the time to change. Now is the time to manage supply chain risks holistically, and begin your journey to resilience.

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