On February 21, 2021, the U.S. federal government signed an Executive Order 14017. The aim of the bill was to strengthen U.S. supply chains, national security and the U.S. economy as a whole. Additional goals of the legislation were to increase the number of manufacturers of the COVID vaccine, identify ways to improve the supply chain of semiconductor chips, and invest in a rare earth element mining company outside of China with the goal of using them to fight against global warming.

Organizations don’t have to rely on the U.S. government alone to help them defend against supply chain vulnerability, however. Since most of the components of a supply chain consist of third parties, organizations can also significantly strengthen their supply chain resilience by implementing supply chain management to enable them to identify and minimize third-party risk.

What is Supply Chain Vulnerability?

Supply chain vulnerabilities are the internal and external risks a supply chain faces. These vulnerabilities can lead to disruptions and failures due to natural disasters, cybersecurity attacks, supply chain disruptions, terrorist attacks, technological failure, a shortage of workers, economic and geopolitical instability and many other factors. As a result, they impact the supply chain.

During the global pandemic the increased demand for many types of manufactured goods (e.g., masks, home) caused an unexpected demand, leading to a surge in the price of containers. Since businesses couldn’t shoulder the price increase, they were forced to pass it onto consumers, contributing to customer churn and a loss in competitive advantage.  Another instance of how these vulnerabilities affect the supply chain can be seen from the recent Ukraine-Russia war. As Ukraine is a major global supplier of grain, the disruption of the supply chain due to the geopolitical conflict led to an estimated loss of $3.2 billion. In August, Discord.io suffered a supply chain attack when their custom invite service was compromised, resulting in the disruption of service to over 1.5 million users. 

What is Supply Chain Risk Management?

Supply chain risk management is the process of identifying, managing and mitigating against risks in an organization’s supply chain. This is particularly challenging as the attack surface of organizations continually expands as the number of suppliers, third parties, IoT devices and cloud migration organizations rely on increases.

Managed service providers (MSPs), for example, must regularly identify risks and vulnerabilities, including anything from cybersecurity threats, such as malicious code distributed to third parties, to privileged access given to unauthorized users and threats to critical technology that could disrupt service to millions of users.

Why Organizations Should Minimize Supply Chain Risk

In times of disaster, companies that can manage supply chain risk are at a competitive advantage compared to organizations unable to adapt quickly to changing supply and demand.

Protecting supply chains also helps organizations:

  • Strengthen business relationships. Minimizing supply chain risk demands better collaboration with suppliers, for example, leading to more trust.
  • Minimize third-party risk. Third-party software, malicious code and malware are examples of all supply chain risks your organization needs to identify to prevent supply chain attacks.
  • Reduce costs. Inefficient distribution or transportation and disruptions in the supply chain can lead to unexpected costs that are often passed on to the customer.
  • Minimize customer churn. Disruptions in supplies,operations and transportation increase the likelihood of customer dissatisfaction and lead to customers moving to the competition.

How Organizations Can Strengthen Supply Chain Resilience

As we saw during the global pandemic, the most resilient companies were those with clear visibility into their entire supply chain that also had effective risk management programs in place. In addition, certain risks are easier to plan for — such as labor supply shortages and transportation issues — whereas geopolitical risk and terrorist attacks can be unforeseen risks.

Artificial intelligence now plays a key role in minimizing supply chain risk. New technologies today are able to forecast disruptions due to weather delays, real-time monitoring can deliver visibility into the supply chain and machine-learning models help identify anomalies in the supply chain to mitigate them as quickly as possible.

The basic steps organizations can take to strengthen their supply chain resilience are: 

  1. Identify risks

Organizations should carefully examine all aspects of their supply chains to identify supply chain risks. Some organizations invest in tools that help to quantify the risk and understand which present the biggest business impact to an organization. Supply chain visibility solutions offer an alternate method to identify risk by delivering accurate real-time data of the different timelines for shipping, procurement, production and delivery so that organizations can be aware of these risks in advance.

  1. Put mitigation and remediation procedures in place

Increasing supply chain visibility also helps mitigate supply chain risk because it leads to more effective communication and collaboration between different parties in the supply chain, including putting a contingency plan in place. Other examples of mitigating risk include diversifying your supplier base if suppliers are suddenly acquired or shut down due to financial challenges. Organizations can also mitigate transportation and distribution risk by regularly checking how optimal the transportation routes are as well as the fulfillment process of the distribution center.

  1. Develop strategies for the future

Some organizations have been able to put systems in place that identify opportunities in their supply chain and quickly adapt to benefit from these opportunities. For example, organizations that rely on South Florida ports for distribution might want to find alternative solutions during the hurricane season for items with a short shelf life. Or an organization might make sure they can halt operations quickly in the event of a terrorist attack or natural disaster.

How Panorays Helps Manage Digital Supply Chain Risks

Panorays helps you manage your supply chain by identifying third-party and n-th party risks in your extended supply chain. With automated questionnaires to expedite third-party risk management, Panorays makes it easy to gather relevant information on third-party risks and vendors’ compliance efforts. Our external attack surface assessments provide security teams with real-time insights into third-party vulnerabilities, making it possible to mitigate risks across their entire supply chain. 

Want to explore how you can evaluate and manage your third-party risk? Sign up for a free demo today or contact us to learn more.


What is supply chain vulnerability?

Supply chain vulnerabilities are the internal and external risks posed to your organization’s supply chain. These risks could be operational (e.g., failure of software or hardware), transportation, logistical, affecting distribution or production. All of these risks, however, have the same impact on organizations — financial and reputational loss and customer churn. Organizations may face rising operational, distributional and logistical costs that they pass on to loyal customers.

What are the most vulnerable supply chains?

Supply chains in the U.S. are the most vulnerable due to their reliance on China and challenges in transportation and logistics. Germany and the U.S. have the most secure supply chains.

What causes supply chain vulnerability?

Supply chain vulnerability is caused by several factors, including natural disasters, geopolitical instability, terrorist and cybersecurity attacks, technological failures, economic instability or financial challenges, a lack of human resources and health factors such as regional or global epidemics.