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SRR---Sustainability, Resilience, Risk Management: The Latest Supply Chain Buzzwords & Investment Opportunities

Whatever you want to call it, supply chain professionals are now more worried than ever about where their stuff is coming from. And the worries are from a variety of perspectives: Can I assure my stakeholders/shareholders that the stuff I'm making is not being produced by child labor, or by cutting down rain forests? Can I ensure that my supply chains have the resilience to respond to a number of possible crises--both known and unknown? and finally, if a crisis does strike, do I have the capability to respond and manage risk, such as having alternative supply sources for key materials?

Sustainability, resilience, and risk management  (SRR) issues are not new in supply chains. They have, however, been amplified by the globalization of supply chains over the past few decades. Even so, companies have been slow to adopt the tools and technology to better manage SRR in supply chains. There are a few reasons:

  • Episodic Events--most supply chain disruptions in the past (pre-COVID) happened only once in a while--an earthquake in Japan, a flood in Bangladesh--might shut down a supplier for a few weeks or longer. Bad news if that was a single-source supplier, but after a few months all was back to normal and likely forgotten
  • Cost versus Benefit--it's hard to convince senior executives to spend a lot of money to mitigate events that happen only once in a while, or never
  • Woke Consumers--it's only been in the last few years that consumers have started to ask companies where their stuff comes from--no blood diamonds, no child/prison production labor, no tearing down of rain forests, etc. No pressure on senior managers means no mandates to improve supply chain visibility & sustainability.

The pandemic is resulting in fundamental changes in supply chain thinking around SRR. Even before COVID, major manufacturers and retailers were requiring suppliers to document where their products were coming from and that they were produced in a 'sustainable' fashion. COVID has only accelerated that trend and piggybacked sustainability with risk management in the process. If you are going to make sure that your suppliers are playing by the sustainability rules, you can also get a better idea if they might pose a risk to your sourcing strategies going forward.

Like flowers in a desert after a rainfall, SRR now appears on many software provider websites, whether or not they have the capabilities to provide deep insights into the issues and a process to mitigate them. We are pretty sure that these providers are only selling a lot of vaporware. SRR requires complex technology built to specifically focus on identifying and documenting suppliers at all tiers (1,2,3,4 and beyond) in a product supply chain. That's where we have made our initial investments in the space.

Our first investment was back in 2002 when we funded risk & resilience management company Resilinc. Resilinc's heritage was helping companies find alternative sources before their competitors when a natural or man-made disaster struck a supply chain. Their vision is for the world to have a place where suppliers and customers can collaborate securely with transparency and trust as the foundation. For a stronger, resilient, sustainable, and fairer supply chain that delivers on the promise of its positive impact on our lives. Today Resilinc’s flagship supply chain visibility, mapping, and AI-powered monitoring, and predictive analytics platform are widely considered the gold standard for resilience.

In 2017, we made our second investment in the SRR space, supplyshift. supplyshift provides supply chain transparency and responsibility software that helps companies discover the insights they need to mitigate risk and improve supplier performance — protecting your business, people, and the planet. supplyshift's primary focus is on sustainable supply chains, allowing companies to assure consumers that the products they are selling are coming from ethically-based supply chains--ones without labor exploitation, planet damaging sourcing, and illegal/counterfeit products, among other factors. They provide a suite of tools purpose-built to accelerate a company's supply chain responsibility efforts--from smart assessments upfront to sophisticated data, dashboard and analytics. 

What do we look for in SRR investment opportunities? Our two investments collectively do a fine job of covering the basics in the space. Here are a few factors we consider when evaluating other investments:

  • Native, purpose-built technology-- many legacy providers are now claiming to have similar SRR capabilities, but their platforms were not built from the ground up to address SRR issues. We look for unique technology specifically focused on the end solutions-mitigating risk, enhancing resilience, and documenting sustainability.
  • Clear business cases--as we said earlier, it's tough to create cost/benefit analyses showing how your SRR product can create real value for a company. We look for well-documented cases where real value has been created.
  • Consistent, not episodic use--one of the early issues in the SRR space was that the solutions were not used on a daily basis and risks were low for supply chains disruptions. Since COVID, all that has changed and it may be years before a new normal (stable supply chains) emerge. The software should be designed to provide valuable data on a daily basis to supply chain decision-makers. 
  • Unique market solutions--supply chains are as unique as the products they serve. Opportunities exist for new SRR solutions to serve various unique verticals that do not fit into existing SRR solutions.