The Target-Rich Labyrinth of the Global Supply Chain

By: Ken Lyon | Advisor & Content Contributor @ Sourceree

As our global economy rapidly evolves, supply chains increasingly present an enticing opportunity for cyber criminals, anonymous state sponsored intruders, and a range of other bad actors. Unfortunately, global supply chains have become a target rich environment.

Supply chains are the mechanisms by which companies buy, make, and sell products. From the extremely complex aircraft to the most basic picnic table, all products in all industries depend on a supply chain of multiple stakeholders, contributing parties, and service providers. In complex supply chains, the choreography necessary to ensure optimal supply chain performance requires two essential ingredients: secure information systems and an integrated network of trusted partners.

Information systems drive most of the developed world’s commercial activities; and to be effective, these systems must operate with incredible speed and accuracy.

Globally, the traditional manufacturing business model has transformed from “sell what we make” to “make what we sell”, resulting in an incredibly fragile environment where any breakdowns or disruptions have enormous consequences.

At each system-to-system interface—including the tens of thousands of edge connections and supporting peripherals—exists an ideal environment for cyber intrusions to occur. A company's ability or inability to understand, prevent, or respond to these threats is critical to the global economy.

Large companies enjoying the view from atop the chain must appreciate that the technology platforms they rely on are equally critical to the rest of their supply chain partner network. Cyber risk management cannot function unless it is a collective endeavor and involves education, proactive audits, and continuous monitoring at key points of information interaction from beginning to end.

Modern manufacturing depends on interconnected digital networks. To illustrate how tough this challenge will be, consider the role of the electronic contract manufacturers (ECMs). Many ECMs are large multinational corporations headquartered in Asia. They manufacture products on behalf of all major consumer electronics brands with a few exceptions. ECMs operate at a massive scale and have developed their operating models over the past 30 years, supporting the rapid growth of consumer electronics worldwide.

Recent studies estimate that over 70% of all electronic household products have been manufactured by an ECM.

ECMs have developed processes that can quickly scale to huge volumes, while at the same time working with compressed product lifecycles before the next iteration or version of a product comes along. Their unique ability to produce high volumes with very little waste or excess inventory, proves how well they manage supply and demand.

This is very attractive to the premier electronics brands. It also means that the brand owners can allocate capital more effectively and focus on innovative product design instead of production or logistics.

Effective ECM’s use advanced technology platforms that connect every touchpoint in their supply chain network. These networks are very extensive and link thousands of suppliers into a single order management system, allowing them to call for the necessary items when they are needed. It is the essence of ‘just in time’ however, many of these suppliers are several tiers down in the network and often invisible to the major tier one suppliers above them, impeding visibility into what is happening on the ground in real-time. Unfortunately, the Covid-19 pandemic highlighted how fragile our modern approach can be when consumer demand unexpectedly disappears or top tier ECMs experience production limitations.

As products are manufactured, the logistics process that will move the products into the markets and onto the customer destinations gets under way. Transportation management systems linked to multiple carriers are constantly tracking available capacity against contracted slots on ships and aircraft. There is always a trade off against service level verses price, but in tight markets, regular high-volume customers—such as the ECM’s—will always have priority.

When products are ready to be shipped, a cascade of instructions are triggered that travel through multiple systems providing the necessary data for the systems of the carriers (shipping lines, trucking companies, airlines, etc.). It is no exaggeration to say that hundreds of systems in multiple countries are involved.

Any disruptions or breakdowns in this digital ecosystem have huge implications in the real world.

Not too long ago, the world watched in awe as just one minor error resulted in a large container ship running aground and blocking one of the world’s major trade arteries, compromising global supply chains for months.

Although this was a human error, it is an effective warning of how fragile our global networks truly are. Considering the high degree of automation used by modern shipping containers and the interconnected port infrastructure, an aggressive cyber hack could affect the world in an unequivocal manner.

The bad guys are always watching. An ever-increasing number of systems exchanging information every second of every day creates an environment that attracts bad actors looking to break-in and create chaos. Thus, positioning ourselves for seamless success and security in the future is contingent on our ability to truly work together and adopt a universal culture of vigilance against cyber threats.

By: Ken Lyon | Advisor & Content Contributor @ Sourceree

Ken has been working at the intersection of business and technology for more than 35 years and is the co-author of the acclaimed 'The Logistics and Supply Chain Innovation Handbook' with Transport Intelligence CEO, John Manners-Bell. In 1990 Ken was hired by United Parcel Service (UPS) to join the senior management team in the European HQ. He spent 10 years as a Director and VP of information services there, helping to establish in 1995, its logistics and supply chain services business globally. This team developed and grew the logistics operations from a $30 million to $900 million enterprise.?