Supply Chain Risk Management (SCRM) in the Manufacturing Industry: How to Identify, Assess, and Remediate Third-Party Risk Up and Down the Chain
With automation making its way into every sphere of business, risk management has become imperative for all industrial sectors. The manufacturing industry, a crucial pillar of the world economy, is a prime target of malicious actors. Independent and state-sponsored hacking groups are increasingly resorting to supply chain attacks to target companies in the manufacturing sector.
Today, most companies are using smart manufacturing technologies to boost productivity and efficiency. But businesses must rethink their approaches to make “smart and secure” the new manufacturing standard because we cannot be oblivious to cyber risk, specifically the growing supply chain attacks.
The NotPetya and WannaCry supply chain attacks are reminders about the evolving and sophisticated nature of third-party cyberattacks. The threat actors behind these attacks spared no one. The manufacturing sector got its share of these attacks.
Lack of Cybersecurity Mandates and Regulations
Unlike most industrial sectors, the manufacturing industry lacks cybersecurity protocols and regulations. These deficiencies have exposed manufacturing businesses to higher and more complex cybersecurity threats.
Additionally, the businesses in the manufacturing industry have naturally been global, with their supply chains in multiple countries. And just like other industries, it is growingly a target of cyberattacks mostly stemming from geopolitical power wrangling.
During the last ten years, many manufacturing companies have been rocked by unpredicted and upsetting third-party cyberattacks. These attacks have forced the manufacturers to recall their products, costing them hundreds of millions of dollars.
Almost all manufacturing organizations are the target of supply chain attacks, including companies in the FMCGs, automobiles, drugs, and electronics manufacturing sectors. Many companies have already lost crucial intellectual property due to data breaches resulting from vulnerabilities in the supply chain ecosystem.
Excessive automation, reliance on third-party vendors, and digitization in the manufacturing sector have exposed the industry to newer risks, such as data breaches and cyber-ransom, in addition to traditional threats like supplier bankruptcy.
The Solution: Next-Gen Supply Chain Risk Management (SCRM)
At the core of the dilemma explained above is a standard trope—the absence of a vigorous and comprehensive process to detect, monitor, and mitigate the increasing third-party risks in the manufacturing industry. That’s where supply chain risk management (SCRM) has got your back.
But the challenges of SCRM have worsened with increased globalization. Even the most sensitive products, such as defense systems, contain parts and components made in other countries where the primary manufacturer doesn’t know it has a supply chain. With the complex nature of the modern supply chain, a minor vulnerability in one of your vendors' systems can expose your entire supplier ecosystem to potential disruption.
The traditional and manual SCRM doesn’t provide protection against the evolving supply chain threats. Your company and every organization in the manufacturing industry require a scalable, versatile, and advanced SCRM built on modern technology.
The next-gen supply chain risk management platform will provide your business with 360-degree protection against the new threats emerging from the complex nature of your supplier ecosystem. It will allow you to monitor and handle problems in a structured manner, besides identifying and addressing risks before they leave adverse impacts on your business.
The three primary components of a good SCRM are risk identification, risk assessment, and risk remediation.
Supply chain risk management starts with the accurate identification of the risks in the first place. Risk profiling and monitoring are the active components of a robust risk identification process.
The standard method to identify vendor risks involves mapping out the value chain of all your important products, vendors, and processes. During this phase, you’ll pinpoint each node in your supplier ecosystem for vulnerabilities, from material suppliers to plants and electronic components to software.
In the next step, you must enter the identified risks in a risk register and continuously track the threats. You’ll also have to keep a record of your supply chain areas where you don’t have enough data for investigation.
The resulting risk profiles will help you identify the possible cybersecurity threats your company may experience. The threats can emerge from flaws in your or your vendors' systems, networks, software, and digital assets that malicious actors can use to steal your data and damage your business.
The common types of cyber risks to look for include data breaches, DDoS attacks, malware, SQL injection, and identity theft. But there are other risks that many manufacturers disregard. Think about human error! An unsuspicious employee of one of your vendors may click on a malware link, exposing their system and your business to severe threats.
Besides monitoring your existing vendors it is vital to properly vet your new third-party vendors for security flaws during the onboarding process. You never know when one of your suppliers may misuse your crucial data or when cybercriminals will target your business through your vendors.
After identifying your supply chain risks, you have to thoroughly slice and dice those risks to determine the potential effects on your manufacturing business. The most crucial vendors are the ones that have the potential to impact your business reputation, sales, and bottom-line.
Depending on your manufacturing niche, the assessment can be broad or narrow; however, it must be synergic and collaborative. You must design the assessment to set a high-security standard, identify the existing securities in place, and examine the areas that need improvement.
Generally, the goals of supply chain risk assessment include:
- Reducing data breach threats posed by your supply chain members
- Examine whether the existing supply chain security is enough to protect your data and company
- Find out how your suppliers interact with your systems, data, networks, and digital assets
- Determine how the members within your supply chain ecosystem interact with each other
- Get the confidence to onboard new and critical vendors
Eventually, companies in the manufacturing industry can create preventive and reactive action plans to cope with the identified and assessed risks. These action plans will act as the foundation for and describe the measure to mitigate the risks, secure your supply chain, and protect your business.
It is vital to understand that third-party vendor security is a collaborative responsibility. As such, you have to involve all of your vendors and suppliers in the risk mitigation process and promote the policy of shared accountability. That requires the application of meticulous cyber hygiene standard to every member in your supply chain that has the privilege to access your systems, networks, and data.
Several manufacturers hit by the NotPetya attack suffered operational downtime because they had ignored patching their systems. Even though system updates can lead to temporary outages, disruptions resulting from supply chain attacks last for an extended period and are expensive. For this reason, you must calculate the cost of downtimes resulting from possible cyberattacks during the risk mitigation process.
Automate Your Supply Chain Risk Management With Vendor360 Software
Supply chain risks in the manufacturing industry are here to stay and even evolve in sophistication, mainly because most manufacturing businesses are becoming excessively interconnected and digitized. Companies using modern risk management solutions will be better equipped to traverse these difficulties with ease.
CENTRL’s Vendor360 supply chain risk management software is an advanced platform for your manufacturing business to identify, assess, monitor, and mitigate all sorts of third-party risks.
This versatile and scalable software collects your vendor data and automates the assessment and monitoring processes, giving you complete control over vendor selection and onboarding.