Shock to the System: Time to Assess Supply Chain Risk

Shock to the System: Time to Assess Supply Chain Risk

July 20, 2020

An argument for reshoring the service, tech & IT supply chain.

University of Melbourne Associate Professor William Ho described the coronavirus pandemic as ‘a wake-up call to businesses in terms of the cost of being under-prepared. Indeed as major brands continue to scramble to recover from reliance on precarious digital ecosystems of offshore IT and customer support desk teams, it’s time to shine a light on supply chain risk.

As we bore witness to the visceral and unnerving experience of shelves stripped bare as stores struggled to play catch-up with surging demand, a frighteningly similar phenomenon was taking place across Australian enterprises as the orchestration of historically cohesive international supply chains became suddenly discordant, with management processes and service delivery hit from all angles.

We think about the pandemic ‘frontline’ as the health providers working valiantly to contain and treat the disease. But just behind them are the thousands who worked to enable us to stay safe indoors: the IT providers who transitioned us to working from home; the Telco’s who kept us connected; the banks who were ‘with us’ as we navigated the choppy waters of personal circumstance; the insurance companies who gave us peace of mind and the tourism companies with whom plans were cancelled or postponed—many of whose weak spots were brutally exposed by precarious ecosystems of offshore IT and customer support desk teams, obliterated by COVID-19 labour shortages, interruptions and shutdowns.

“The five operational performance objectives of any business are speed, flexibility, cost, dependability and quality. There are always trade-offs, and when you prioritise cost reduction it is often to the detriment of the others. Given the massive disruption COVID19 has wrought on global supply chains, many are now re-examining their strategies and I hope that greater emphasis is now being placed on the dependability, flexibility and quality vectors. With any luck, it might lead to increased reshoring of services and a stronger Australian economy.”
– Bart Thomas, Director of Business Operations, DX Solutions.

Like the impact of disruption to raw product, manufacturing and logistics that we could see with our own eyes as products disappeared from shelves, service providers were no less vulnerable to the effects of scarcity and disruption. Customers certainly felt the supply chain challenges affecting the provision services and digital goods in the form of extended wait times, overburdened digital systems and decommissioned service teams.

As the COVID-19 months have demonstrated, sending work offshore presents serious risks around labour disruption, system stability, network robustness and data security, especially in regions where telecommunications and infrastructure are not as well developed as here in Australia, as concurred by IT industry advocate and corporate CIO Peter Nevin:

“Organisations’ increasing reliance on digital/IT has frequently not been accompanied by an appropriate increase in the maturity of their risk assessment and contingency planning. For far too long IT sourcing decisions have been made with a myopic focus on cost reduction and a woefully inadequate assessment of the real business impact of service unavailability, particularly where that unavailability is over the longer term.”
– Peter Nevin, CEO of Nevin Consulting.

The operational aspects of integrated business processes compound this perfect storm with links in the chain suddenly shut down or out of range in tandem with surges in demand for sales, help and advice—the scale of which catching service providers by as much surprise as their manufacturing, distribution and retailer counterparts.

Looking beyond the recent pandemic disruption to the potential for diplomatic challenges and political unrest, data storage and privacy may present new challenges to consider. Unlike sovereignty applied to international airspace for which the global community has robust and respected international treaties in place, digital law including internationally stored data enjoys no such protection. According to Technology Law Lecturer Hon. Peter Vickery QC:

“In the fast-evolving field of technology, data stored in the cloud is not immune from foreign access or control, particularly where a cloud service provider is a foreign company.”
– Hon. Peter Vickery QC, Occasional Lecturer ‘Law and Technology’, University of Technology Sydney (UTS).

An example is the United States federal law enacted in 2018: the Clarifying Lawful Overseas Use of Data Act or ‘CLOUD Act’, as it is known. The CLOUD Act allows federal law enforcement agencies like the FBI to compel U.S.-based technology companies by use of a warrant or subpoena to provide requested data stored on servers, meaning Australian data which is stored in the cloud by a US company is, in theory, currently obtainable by US law enforcement via the CLOUD Act. And this is but one example of similar risks presenting country by country, jurisdiction by jurisdiction.

So, where to from here?

COVID-19 isn’t the first big disaster to derail business operations and sadly it won’t be the last. As the international landscape becomes increasingly vulnerable to any manner of environmental disaster, disease or unrest, Australian businesses should be thinking carefully about where their work is done, and the impact of the next shock to the system.

It’s time for boardrooms around the country to take stock and have some tough conversations about their exposure to supply chain risk, and that conversation must not be limited to raw product, manufacturing and logistics. The service, tech & IT components of the supply chain is of equal significance, and businesses need to invest in keeping these functions onshore. Your customers want it. Your country’s economy needs it. And the viability of your service provision might one day depend on it.

DX Solutions is a wholly owned and operated Australian private company providing businesses with strategic solutions to optimise, transform and progress their operations. With around 200 employees we are proud to partner with software, project and network engineering teams to deliver quality assurance, test automation, CI/CD, agile project management, business process analysis and automation (RPA), network engineering and cloud infrastructure services for Australia’s major digital transformations.