Third-Party Data Helps Manufacturers Identify Supply Chain Red Flags Faster

While global supply chain risk is certainly not new, our need and ability to identify and assess it quickly affects every facet of our businesses. From the ESG expectations of consumers and the increasing global regulations to company board and c-suite expectations, supply chain transparency and risk management is of the utmost importance for success.

During the Covid-19 pandemic, supply chain disruptions plagued at least 94% of Fortune 1000 companies and many of these issues have left companies floundering. The use of high-quality third-party data in supply chain analytics means faster assessment of potential supply chain risks and an ever greater ability to assess challenges in the future.

In this article, we will discuss how to best use third-party data to create the strongest risk assessments and most thoroughly help your company identify your ever evolving and nuanced supply chain risk. And, we’ll show you some tools to make this as easy as possible.

Global problems highlight gaps in risk insights

The disruption caused by the pandemic made it clear that most supply chain risk mitigation processes fall far short of what’s needed. McKinsey research shared during Davos found that many organizations lacked visibility into their entire supplier ecosystems. Fewer than half of the surveyed organizations reported visibility to Tier One suppliers, only 21% to Tier Two, and a mere 2% to Tier Three and beyond. A staggering 11% admitted they had no risk mitigation processes at all, leaving them wide open to litigation that could lead to fines and a decline in consumer engagement.

Rob Handfield, executive director of North Carolina State’s Supply Chain Resource Cooperative writes, “Organizations need to map out their supply networks—including their Tier One, Two and Three suppliers—and conduct an analysis to identify the potential risks associated with them.”  This where third-party data can help. With the right data sets integrated in predictive analytics or risk screening applications, organizations can better understand potential threats and take appropriate action to correct issues or avoid them altogether.

Beyond the ability to see these physical supply chain issues, you can also use these third-party datasets to see shifts in consumer sentiment online, from the broad view to the granular, individual customer view of your company and its alignment with ESG values they prioritize. When you engage in ways that embrace due diligence, you keep consumers engaged with your products and services, which drives growth.

Conversely, when your customers see manufactures are utilizing child labor or that a manufacturer is not addressing environmental concerns, they use their wallets to speak the loudest and take their money elsewhere. It can equate to huge losses and even the end of a business.

MORE: Supply chain transparency: Food and beverage industry standards

Monitor for emerging regulatory risk with sanctions data

Geopolitical conflicts and instability can substantially increase regulatory risk. For example, since the Russian invasion of Ukraine, governments around the world have imposed thousands of sanctions, with new ones being introduced daily. Just last year, the U.S. added 14 international suppliers of Russian military supply chains to the sanctions list, as well as expanding individuals targeted by sanctions to include spouses and children of those on the lists.

The ability to integrate aggregated sanctions, watchlists, and PEPs data into your due diligence and risk monitoring workflows allows you to remain current without the time and effort formerly needed to constantly check dozens of different sites. It saves the company time, and that means you have more resources to address issues, innovate internally, or even expand your risk assessments to create a fuller, more expansive picture of the risks you face and their potential outcomes.

MORE: The new era of due diligence

Identify reputational risks with adverse media and ESG news

By now, we’ve all seen how a viral tweet can turn into a firestorm of controversy that damages an organization’s reputation. Rising consumer and investor interest in the environmental, social and governance (ESG) commitments of manufacturers magnifies reputational risk, especially with the expansion of the social media world.

From worrying environmental or human rights activities related to violations of anti-bribery and corruption laws by a business partner, failing to identify ESG threats anywhere in your supply chain leave you widely exposed to consequences. Consumers are no longer solely relying on media reports to inform their purchasing decisions. Social media and word-of-mouth can make a major impact on your business should a negative story go viral.

To address these current global issues, governments worldwide have introduced laws to encourage good and proper ESG practices. In early 2023, the European Commission adopted a proposed Directive to “foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance.”

Likewise, the UK recently implemented environmental reporting regulations, while the U.S. Securities Exchange Commission (SEC) announced a draft rule on corporate climate disclosures. Enforcement of these regulations is also on the rise, both by the governments creating the regulations and consumers.

The ability of third-party data tools to constantly screen global print, broadcast, and online media means warning signs of both reputational and ESG risk surfaces quickly thus enabling proactive risk mitigation. When choosing a data set, it is important to choose a news API that allows you to narrow results to focus on adverse or ESG news mentions that meets your requirements. If your API is not agile enough to be adjusted for your specific company needs, finding applicable and relevant red flags will be like searching for a needle in a haystack. Having a specifically tailored API data set allows you to bypass those challenges and find risks faster.

MORE: How risk managers benefit from quality data

Improve awareness of financial risks with company and legal data

The financial stability of key suppliers is crucial to a smooth supply chain. Because of the recent global pandemic and current geopolitical conflicts, many companies are in a precarious financial position. The OECD predicts, “The number of non-financial corporations in distress, i.e. firms that are anticipated to have a negative book value of equity and therefore a high risk of insolvency, is expected to increase worldwide.”  Financial instability in lower tier suppliers can have an astounding domino effect that negatively impacts all others in the chain, in an exponential way.

Integrating third-party data related to company financial information or legal cases into risk analytics platforms swiftly brings warning signs of financial instability into focus. Because it is not always as obvious as a finding a company’s bankruptcy filing, the ability to filter out or focus on other types of litigation helps illustrate if a certain supplier might also pose a financial risk to your company and consumer base.

Integrate third party data for better supply chain management

As technology thought leader Bernard Marr states it with brilliant clarity, “External data sources can help you understand what your competition is doing, as well as how trends such as consumer behavior patterns, market dynamics or even the weather can impact your performance. ”In the case of manufacturers and complex supply chains, third-party data can enhance your company’s unique and specific risk analytics so you can see and respond to threats faster, maybe dodging an issue before it even happens and causes damage to your bottom line.

Nexis® Data+ rapidly powers your big data projects through flexible data APIs and environment options that includes highly relevant, archival, and current third-party datasets. Our predictive modeling and risk management applications improve your risk visibility by offering the timely, relevant data needed for top-tier risk assessment. You and your manufacturing teams will be able to identify supply chain red flags in a flash, helping you stay ahead of the competition by giving you all you need to succeed.

 Why wait? Explore all Nexis® Data+ has to offer today!