Top 10 Supply Chain Threats and How to Mitigate Them

Supply chain threats can stop the flow of goods and services. Knowing these threats is key to business continuity and financial stability. This article covers the top 10 supply chain threats and how to tackle them.

What are Supply Chain Threats?

Supply chain threats are wide ranging, from compliance and cyber to operational and environmental. These top supply chain risks can impact the whole supply chain and need to be managed. Globalization has added national security, regulatory and sustainability to the mix, making managing the global supply chain even more critical. These external threats can stop the supply chain in its tracks and cost you money and disruption.

Since 2018, supply chain attacks have surged by more than 2,600% with the total number of victims being more than 54 million in 2023. If we compare 2022 to 2023, the average number of supply chain breaches that have had a negative impact on companies has increased by 26%.

Operational risks can cause delays, cost increases or quality issues, across the whole supply chain. For example, a machine breakdown in a factory can stop production and delay product delivery. Such disruptions affect the production cycle and can cost millions.

Supply chain leaders (or supply chain professionals) need to be proactive in managing these risks and their supply chain. Knowing your supply chain security threats allows you to develop a risk mitigation strategy and keep your supply chain running smoothly.

10 Popular Supply Chain Threats

Geopolitical Unrest

Geopolitical unrest is a major risk to global supply chains. Political unrest can cause global shortages of energy and raw materials and impact supply chain planning and logistics. For example, political unrest in North Africa, the Middle East and Ukraine has disrupted supply chains big time.

Government imposed trade restrictions, such as tariffs or sanctions, can stop the flow of goods across borders and cost you more. Political unrest can create uncertainty that hinders smooth operations, resulting in delays and re-routed resources. These disruptions can impact supply chain security and efficiency big time.

You can mitigate geopolitical risks by:

• Mapping, monitoring and measuring your exposure to these events
• Diversifying your suppliers
• Having live connectivity with your logistics partners
• Preparing for the worst

These will help reduce the impact of geopolitical risks on your supply chain.

Economic Fluctuations

Economic fluctuations can impact your supply chain big time by increasing costs for fuel, energy, labor and overall business operations. Currency fluctuations can also impact the cost and pricing of imported goods and your supply chain budget and financial planning. So you need to have a comprehensive supply chain risk management approach.

Inflation and economic downturns can cause material costs to rise, making it hard for manufacturers to get ingredients at a price that works. Economic recessions can also reduce consumer demand, putting more pressure on the supply chain. For example, after Russia's invasion of Ukraine, energy prices have increased by 20%.

To mitigate these economic risks you can diversify your suppliers, build strong supplier relationships and use insurance and financial tools. Using predictive analytics and real time data will help you forecast demand better and optimize inventory. These forward thinking measures will help you manage economic fluctuations and keep your supply chain resilient.

Climate and Environmental Risks

Natural disasters like earthquakes, floods and hurricanes can disrupt supply chains by damaging infrastructure, stopping production and delaying transportation. These environmental risks will cost you more in repairs, equipment replacement and finding alternative routes.

You need to invest in business continuity planning so you can operate after a disaster. Going green can also help your supply chain resilience by reducing waste and increasing resource efficiency. Integrated supply chain solutions can help you get ahead of climate surprises by improving sustainability and overall efficiency.

Cybersecurity Threats in Supply Chain

Cybersecurity threats are on the rise with the growth of cloud connected supply chains and IoT networks. Ransomware attacks have increased by over 70% in 2023, and are on the road to be higher. High profile incidents like the MOVEit hack in 2023 and the SolarWinds attack in 2020 are a wake up call to the supply chain.

To address these threats you need to invest in robust cybersecurity measures which include:

• Continuous monitoring and detection tools
• Vendor contracts that include cybersecurity requirements like data breach notifications and regular audits
• Regular cybersecurity training and awareness programs for employees and suppliers

Having a strong framework (third party or vendor risk management framework in this case) like the NIST Cybersecurity Framework (CSF) 2.0 is critical for managing cyber risks in the supply chain. Implementing these forward thinking measures including third party risk assessments will protect your supply chain from potential cyber threats.

Operational Inefficiencies

Delays, costs and quality issues in the supply chain can be attributed to operational inefficiencies. Operational inefficiencies will disrupt the supply chain. For example, poor inventory management will cause stockouts and impact overall supply chain performance. Operational errors like mislabeled packages and wrong product selection are common sources of inefficiencies.

To fix these you need to manage and optimize your processes including managing supply chain risks. Streamlining inventory management, reducing packaging material usage and optimizing logistics is key to improving supply chain efficiency. Addressing these operational risks will improve your supply chain resilience and overall performance.

Supplier Dependence and Reliability

Supplier dependence and reliability is key to supply chain resilience. Over reliance on a single supplier can cause supply shortages due to natural disasters or political instability. To mitigate these risks you should diversify your supplier base and source from multiple regions.

Knowing your suppliers is key to making strategic decisions on external products or services. Having supplier performance monitoring systems in place is critical to ensure suppliers meet your standards. This will enable them to supply products or raw materials during disruptions.

Building strong supplier relationships through regular communication, collaborative planning and shared risk management will give long term stability and resilience. Developing these relationships will reduce supplier risks and a resilient supply chain.

Logistics and Transport

Logistics and transport can cause significant supply chain disruptions. Shipping bottlenecks, port closures and transport mode failures will increase freight costs and impact supplier relationships. Recent events like the container ship blocking the Suez Canal have highlighted these risks.

Implementing dynamic and automated freight management will help mitigate logistics risks. AI driven planning features in logistics software will manage warehousing, distribution and last mile delivery more efficiently. These will make supply chains more efficient by ensuring timely and error free product delivery.

Using real time information, automated processes and standardized freight documentation will help reduce supply chain disruptions caused by logistics risks.

Lack of Visibility and Transparency

Lack of visibility and transparency in the supply chain will cause inefficiencies and risks. Transparency means exposing practices and open communication with suppliers to identify and fix inefficiencies.

Technologies like AI, blockchain and RFID can improve supply chain transparency by tracking, storing and providing real time information. These will give visibility into the entire supply chain from raw material sourcing to end consumer.

Using digital transformation technologies like IoT and cloud based software will streamline processes and give visibility across the supply chain. Transparency will enable businesses to manage supply chain risks better and operate smoothly.

Mitigation Strategies for Supply Chain Threats

Mitigation strategies for supply chain threats are:

• Agile procurement which will mitigate transport mode failures and shipping delays
• Predictive analytics and having relationships with alternative suppliers which will protect against poor supplier performance
• Investing in inventory management and having buffer stock on hand which will also mitigate risks

Businesses can respond to risks by using powerful software that integrates supply planning, inventory management and demand planning. These integrated tools will enable quick and efficient decision making. Implementing these will enable you to build a supply chain that can withstand many threats.

Building a Resilient Supply Chain

Building a resilient supply chain means:

• Flexibility
• Redundancy
• Adaptability
• Visibility
• Collaboration

Flexibility will allow supply chains to adjust to changes, redundancy will have backup options in place. Comprehensive risk management plans including scenario planning and contingency planning is key to supply chain resilience. Effective inventory management will balance just in time (JIT) and just in case (JIC) to maintain efficiency and resilience.

Like Alan Liska says:

“They can't just be backup sitting on your network because the ransomware actors will find those and they will encrypt them.”

Integrating operations and using advanced planning software will enable businesses to:

• React to demand volatility and other market changes
• Build a resilient supply chain
• Get a competitive edge
• Keep operations running during disruptions.

Why Managing Supply Chain Threats is Crucial

Managing supply chain threats is key to business continuity, cost efficiency, customer trust and overall financial success. A disruption in the supply chain will impact a company’s bottom line, so risk management is critical.

Good supply chain management is about finding efficiencies, cutting costs and mitigating risks within acceptable risk levels. Managing supply chain risks will help businesses keep customer trust, boost brand loyalty and long term success.

Enhancing Supply Chain Resilience with Recorded Future

To effectively manage these risks, businesses need real-time threat intelligence that goes beyond traditional risk management practices. Recorded Future’s supply chain risk mitigation solutions provide unparalleled visibility into potential threats, offering actionable insights that allow your business to proactively address vulnerabilities before they can cause disruptions. By leveraging vast data sources and advanced analytics, Recorded Future helps you maintain a secure, resilient supply chain.

We deliver comprehensive intelligence on your suppliers, partners, and the broader supply chain ecosystem. This allows your organization to assess risks with precision, prioritize actions, and safeguard your operations against evolving threats. With Recorded Future, you gain the confidence to protect your supply chain, ensuring long-term success and maintaining trust with your customers.

Supply Chain Threats FAQs

What are the main types of supply chain threats?

Compliance, cyber, operational and environmental risks each pose different challenges to the supply chain. These must be managed to keep business running smoothly and securely.

How do businesses mitigate geopolitical risks?

Businesses can mitigate geopolitical risks by mapping, monitoring and measuring their exposure to these events, diversify suppliers and have live connectivity with logistics partners. By doing so businesses can prepare and manage geopolitical risks better.

How do you manage economic fluctuations in the supply chain?

To manage economic fluctuations in the supply chain you can use strategies like predictive analytics, diversify suppliers, build strong supplier relationships and real time data for advanced demand planning. These will help mitigate the impact of economic changes on your supply chain.

How do cyber threats impact the supply chain?

Cyber threats will disrupt supply chains by exploiting trust relationships between organizations, often targeting the weakest link and causing operational disruption. This will lead to delays, financial loss and potential damage to the brand.

Why visibility and transparency in the supply chain?

Visibility and transparency in the supply chain is important because it will help you identify inefficiencies, keep operations running smoothly and manage supply chain risks. Technologies like AI, blockchain and RFID will do this by giving you real time tracking and information.

Wrapping up

Understanding and mitigating supply chain threats will keep the supply chain running smoothly and business continuity. By being proactive with strategies like agile procurement, predictive analytics and robust cybersecurity businesses can build supply chains that can withstand many challenges.

In the face of ever changing risks supply chain leaders must be vigilant and adaptable. By continuously reviewing and improving their risk management practices businesses can stay ahead of disruptions and be competitive in the global market.

Ready to strengthen your defense strategy? Schedule a demo today and see how Recorded Future can help you mitigate and protect your organization from supply chain threats.