LP Magazine

NOV-DEC 2018

LP magazine publishes articles for loss prevention, asset protection, and retail professionals covering shrinkage, investigations, shoplifting, internal theft, fraud, technology, best practices, and career development.

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38 NOVEMBER-DECEMBER 2018 | LOSSPREVENTIONMEDIA.COM Into the Rabbit Hole of Supply-Chain Risk Learning How Much We Don't Know Is the First Step to Appreciating Supply-Chain Risk Management T he supply-chain web is spun so intricately that it's impossible to know it, truly. Perhaps the most we can aim for is to gain knowledge about one link, then another, and gradually appreciate more fully how pieces fit together. Maybe it's not realistic—when it comes to today's supply chain—to have a goal of becoming an "expert." Instead, dedicate oneself to being a lifetime student of supply chain's infinite complexities. The aim of supply-chain risk management (SCRM) is fairly straightforward. It's how we help to identify risk and manage supply-chain security adequately. But learning about supply-chain risks is a bit of a rabbit hole. Even something seemingly basic can be muddy, such as where supply chain starts. (With a product's manufacture? When plans are drawn? At ideation?) What's certain is that risks are inherent at every step along a product's path to a store's shelf. And, perhaps, back again as purchase does not always mark an end to a product's path through the supply chain. In the case of a return, the product may hit the road again, from store back to vendor, and undergo additional steps. In the case of, say, an oil-filled radiator, a vendor may face a series of environmental regulatory steps before parts and pieces are sent back to the manufacturer or a scrap company. The number of players, the differences in technologies, the amount of information, and the sheer volume of interactions between these and other layers of today's global supply chain make it extremely difficult to identify risks, let alone mitigate them. Supply-chain management encompasses the coordination of the many activities related to sourcing, procurement, conversion, and logistics. It involves planning and processing orders; handling, transporting, and storing the products purchased, processed and/or distributed; and managing the inventory of goods in a coordinated manner. And there is risk through it all—as broad and diverse as the supply chain itself. Cargo theft is an example of a risk in the supply chain. It is, however, a single risk within a small section of the supply chain (logistics). A furniture manufacturer/seller of wooden dressers, for example, will have to manage myriad supply-chain risks long before it has even made a product to ship. For every metal screw or plastic knob that will come from a supplier, the company will need to assess reliability, and for every shipment of wood, its health and quality. Geographic Impact of Supply‑Chain Risk Management Today's vulnerabilities are multiplied due to greater geographic distances and the complex processes of the supply chain. Globalization presents unique challenges when applying supply-chain risk management methodologies to safeguard the supply chain from emerging threats and vulnerabilities. Disruption can hit the supply chain at any point, from manipulation in raw material usage, malware and intrusions in digital supply-chain processes, cargo theft, and crime in warehouses and distribution centers. At the very broadest level, external supply-chain risks include: ■ Demand risks caused by unpredictable or misunderstood customer demand. ■ Supply risks caused by any interruptions to the flow of product, whether raw material or parts, within a company's supply chain. ■ Environmental risks from outside the supply chain, such as economic, social, governmental, and climate factors, including the threat of terrorism, global crisis and recession, and political upheaval. ■ Business risks caused by factors such as a supplier's financial or management stability, or purchase and sale of supplier companies. ■ Physical plant risks caused by the condition of a supplier's physical facility and regulatory compliance. In each area, questions fuel a risk-management process. Our furniture company, for example, needs clarity on key issues related to its suppliers if it is to embed resilience into its business. Intellectual property is one area—one among many—that it needs to examine. ■ Do our suppliers have a history of intellectual property theft? Been accused of it? By Maurizio P. Scrofani, CCSP, LPC Scrofani is an LPM contributing writer and well-known supply-chain asset protection professional with over twenty-five years of experience in retail and manufacturing, including leadership roles with Macy's, Bloomingdale's, Delonghi, and Toys"R"Us. He was cofounder and president of CargoNet, a supply-chain theft prevention and recovery network solution of Verisk Analytics. Currently, Scrofani is the chief supply-chain security officer for ALTO Assurance where he leads the team that offers shippers and logistics providers a comprehensive, end-to-end asset protection and risk- management technology solution. He can be reached at mscrofani@alto-us.com. SUPPLY CHAIN continued on page 40

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