In a recent article, I talked about how supply chain operating networks are finally beginning to emerge, and how that will change what supply chain software platforms look like in a few years. There is another development that will also change what our supply chain platforms look like, the emergence of innovative new supply chain risk management solutions. The control towers, the visibility layer that will become integral to next generation supply chain platforms, will come to include these advanced risk management capabilities.

Supply Chain Control Tower Layer Will Include Robust Risk Management Capabilities

Foreign direct investments have increased 25-fold since 1980. Dramatic increases in sourcing from low cost nations, supported by IT technologies, have internationalized supply chains. The internationalization of business increases exposure to a wide variety of global risks. Companies are vulnerable even if they have no immediate presence in the geography where the risk arises. The resilience of any individual business depends heavily on the resilience of its suppliers and key trading partners, whose supply chains can span many countries.

Major suppliers of SCM solutions have lagged in understanding emerging next generation supply chain risk management solutions that logically should be included in a global visibility cockpit. The two new entrants to the market offering revolutionary new solutions are riskmethods and Elementum. Both riskmethods and Elementum were identified as Rising Stars in our recently published Supply Chain Visibility and Collaboration market study. Both companies are still small, but have the potential to grow very fast. In both cases, the solutions they are offering will be difficult to copy.

An advanced supply chain control tower will always contain information that goes beyond what is in internal enterprise applications. The Internet of Things buzz is leading to more focus on how GPS, social media, and internet data (like online newspaper articles) can be used, mashed up, layered over a company’s supply chain network map, combined with existing data (like EDI event notifications), and result in far more timely and meaningful warnings about a wide variety of supply chain risks that have historically been poorly monitored.

riskmethods, for example, works by continuously monitoring risks identified across more than 300,000 online and social media sources. After using riskmethods, one customer found two bankruptcies that its other risk management tools absolutely did not report on in a timely manner, but which riskmethods picked up almost instantaneously. In one case, a supplier had been mired in litigation for over a decade. While this company’s financial metrics looked strong, they lost the law suit and filed for bankruptcy.  riskmethod’s customer knew right away that this supplier had lost the suit and began alternative sourcing.

Leading SCM suppliers need to recognize that to be able to offer a supply chain operating network, the visibility cockpit that sits on top of other networks, they will need to offer advanced risk management capabilities. Offering an advanced supply chain risk management solution, like those offered by risk methods and Elementum, is perhaps best achieved by partnership or acquisition.

These are not solutions that can easily be built by a company using Platform as a Service and Information as a Service tools. The risk alerts are monitored by humans at these two vendors. The people involved mark all risks as real or as false positives. Than the risk management engines use machine learning to improve their alerting capabilities. The fact that Elementum and riskmethods are engaged in these activities for many customers allows them to accelerate the machine learning in a way in which an individual company could not match.

Further, most major supply chain software companies believe they are in the business of developing software, not managed services. With that viewpoint, these vendors would not be interested in hiring personnel to staff the risk management cockpit that is critical to making these solutions work.

For more details on the study this analysis was based upon, contact Conrad Hanf at chanf@arcweb.com.