Current estimates about the direct economic impact of the closure of the Port of Baltimore following last month’s bridge disaster currently stand at around $15m per day, according to state and federal officials. However, experts warn that the indirect impact on supply chains may be far greater. 

Regardless of your business’s location or the extent of its supply chain activities, the disaster serves as a wake-up call about the risk of supply chain disruption caused by factors out of your control. As the case of Baltimore’s showed, disturbance at a logistics port in one country can change global trade patterns around the world. 

But planning for the unknown can help you mitigate supply chain risks. Against a backdrop of a string of disruptive events around the world – from issues in the Suez Canal and drought in the Panama Canal – it’s a school of thought that’s more pertinent than ever.

And yet, despite organisations’ reliance on their suppliers for ‘value add’, few finance teams are devoting sufficient risk management to their supply chains, warns Nick Wildgoose FCA FCIPS, CEO of Supplien Consulting. He also warns that the general reliance on ageing infrastructure within supply chains – among other factors – means that the risk of supply chain disruption is increasing. 

A 2021 American Society of Civil Engineers report indicated that in the US, 42% of bridges are more than 50 years old and 7.5% of them were structurally deficient. “Without logistical, electricity, or water infrastructure your critical suppliers can’t operate,” says Wildgoose. 

A supply chain and risk professional who has held a variety of global financial, procurement and commercial positions across organisations including PwC, the Virgin Group and Zurich Insurance Group, Wildgoose has also served on the Board of the Chartered Institute of Procurement and Supply and as a specialist adviser to the World Economic Forum on systemic supply chain risk.

Avoid eggs in one basket

He says that proactive mapping of your supply chain with support from finance can help to mitigate some of these risks. “Some of those companies that have been ahead of this issue in Baltimore, for example, will have already had a backup at another East Coast port so you’ve mitigated your risk straightaway.” Not having all your supply chain eggs in one basket also gives more potential leverage and capability to ramp up capacity while a competitor is struggling, he adds. 

Wildgoose says boosting supply chain resilience relies on finance teams investing in appropriate processes, technology and training for people. “Current software allows you to map out where your critical products are coming from – giving you visibility over your tier-one direct suppliers, and then ideally other suppliers down through the tiers. Without that visibility, you’re like a pilot trying to fly a plane without instruments. And yet that’s effectively what a lot of companies are doing.”

“Using technology to increase visibility of your supply chain is also a potential source of competitive advantage, Wildgoose says. “Using a chess analogy, if your opponent has invested in supply chain technology that allows them to see the board and where the pieces are moving, and you’re playing blind, who do you give the most chance of winning the game?” 

More than just good risk management, having a good understanding of your supply chain is simply good business practice, Wildgoose says, particularly as the focus on ESG continues to ramp up. “If you’re the CFO of a company, and you’re saying you’re comfortable knowing nothing about what’s going on in your tier-two and three supply chain, I would say that the regulators are going to come after you.”