The rise in supply chain attacks has highlighted a significant issue in supply chain risk management (SCRM): most organizations are unaware of the potential risks in their supply chains.
This limitation is caused by a discontinuity between cybersecurity initiatives and the threat landscape of global supply chains.
Supply chain ecosystems are unpredictable, dynamic, and always evolving. To optimize their supplier risk mitigation efforts, organizations need real-time visibility into the different types of risks in the supply chain.
In this post, we outline the four different categories of risk management software that can mitigate risk exposure in supply chain operations.
What are supply chain management tools?
Supply Chain Management (SCM) Tools are software solutions designed to plan, execute, and monitor the entire span of supply chain operations, spanning from the initial procurement of raw materials to the final delivery of the product or service.
In essence, they provide the digital infrastructure to manage the complex flow of goods, data, and finances.
Significance in the modern ecosystem
The significance of these tools has evolved drastically. Modern supply chain ecosystems are unpredictable, dynamic, and always evolving. To maintain efficiency, reduce costs, and optimize mitigation efforts, organizations need real-time visibility into the various types of risks that could disrupt the entire supply chain.
Crucially, SCM tools must now encompass digital risk management. The traditional view of SCM, focused solely on logistics and inventory, has been superseded by a reality where a flaw in a third-party application or an exposed vendor server can be the primary point of failure.
The goal of contemporary SCM tools is threefold:
- Optimize efficiency: Streamline processes like inventory management and logistics.
- Reduce cost: Minimize delays and waste across the workflow.
- Mitigate risk: Control the impact of disruptions, with primary focus on preventing supply chain attacks and associated cybersecurity risks that have the greatest impact on all other categories of risk.
By focusing on the different categories of SCM solutions, businesses can investigate potential solutions through the lens of their unique management system objectives, rather than being pigeonholed into a specific list of providers.
Categories of risk in supply chain management
All supply chain disruptions can be mapped to six categories of risk:
- Cybersecurity risks - Third-party risks, including supply chain attacks facilitated by vulnerabilities in third-party software.
- Geopolitical risks - Political events that disrupt business continuity in the supply chain, such as the current unsettled relations between Russia and Ukraine.
- Man-made risks - Human errors causing workflow disruptions, such as fires or staff falling for phishing attacks.
- Natural disaster risks - Natural events that cause delays throughout the entire supply chain, such as storms or pandemics.
- Reputational risks - Reputational damage caused by failed contingency plans that could impede procurement processes.
- Financial risks - Pressures on profit margins caused by product development issues, poor supplier management, or events in any of the above categories.
To simplify mitigation strategies, organizations should focus on the various categories of supply chain risk management solutions, rather than being limited to a specific list of providers. This approach will empower businesses to investigate potential solutions through the lens of their unique management system objectives.
Types of supply chain software
To effectively manage the six categories of supply chain risk, organizations utilize a portfolio of software solutions that address operational efficiency, governance, and security. These solutions can be grouped into four primary types, illustrating where cyber risk tools fit within the larger operational context.
1. Risk analysis platforms (security focus)
These tools are singularly focused on identifying, assessing, and mitigating operational and security risks across the entire ecosystem. This category is essential for managing the digital exposures that underpin supply chain attacks.
- Key function: Providing real-time visibility into third- and fourth-party risk, compliance gaps, and the severity of security posture.
- Examples: Vendor Risk Management (VRM) solutions, Attack Surface Monitoring, and geopolitical intelligence platforms.
2. Inventory and logistics tools (efficiency focus)
This is the traditional core of SCM, comprising software for managing the flow of physical goods, storage, and transportation. While focused on efficiency, a disruption here can quickly cascade into financial and reputational risks.
- Key function: Optimizing physical movement, reducing lead times, and improving demand forecast accuracy.
- Examples: Warehouse Management Systems (WMS), Transportation Management Systems (TMS), and Demand Planning software.
3. Supplier relationship management (SRM) systems (collaboration focus)
These platforms manage all interactions with, and information about, suppliers. SRM systems are crucial for streamlining procurement and maintaining the integrity of the supply base.
- Key function: Streamlining procurement processes, managing contracts, and evaluating supplier performance.
- Examples: Procurement software, e-Sourcing tools, and collaborative communication platforms.
4. Compliance and audit software (governance focus)
These tools ensure adherence to regulatory standards, industry frameworks, and internal policies across the supply base. They are vital for translating risk assessments into actionable governance.
- Key Function: Tracking third-party risk metrics and compliance gaps against frameworks (e.g., mapping VRM results to cybersecurity frameworks).
- Examples: Governance, risk, and compliance (GRC) platforms, and specialized trade compliance software.
The 4 quadrants of supply chain management
By implementing supply chain management tools in each of these four strategic quadrants, the majority of supply chain risks will be addressed. This framework illustrates how tools align with critical functions such as visibility, collaboration, risk control, and efficiency.
1. Attack surface visibility
Cybersecurity is the most critical risk category, and the first step to addressing security risks is to discover them. Attack surface visibility is especially complicated in the supply chain because attack vectors extend beyond the third-party level. The suppliers of your suppliers (fourth parties), and even their social media profiles, could act as pathways to your sensitive data if they're compromised. It's imperative, therefore, to monitor both the third and fourth-party landscape throughout the entire lifecycle of each supplier.
Tool Mapping
Attack surface monitoring solutions (e.g., Vendor Risk by UpGuard) help stakeholders identify all security risks across their third- and fourth-party ecosystems, measured by severity or risk scores.
Real-World Application (Visibility)
A large e-commerce retailer uses an Attack Surface Monitoring solution to scan its entire third-party ecosystem and the fourth parties of its critical logistics partners. The tool discovers an unpatched, high-severity vulnerability on a fourth-party vendor's public-facing file server, which is immediately highlighted due to its high risk score. The system's real-time visibility allows the retailer to alert the logistics partner, forcing a patch before threat actors can exploit the vulnerability and potentially gain access to the retailer's shipment data, thus preventing a security incident that could compromise sensitive data.
2. Vendor risk management (VRM)
A vendor risk management solution will further support the discovery of third- and fourth-party risks. Besides a surface-level attack surface scan, a deeper risk analysis is required in the form of risk assessments. VRM solutions help you manage the complete scope of third-party risk management (TPRM), enabling automation options to ensure assessments are always sent on schedule.
Tool Mapping
VRM Solutions (e.g., Vendor Risk by UpGuard). With a VRM solution, you can either choose from a library of risk assessments or use them as a template for your own custom questionnaire designs. The results of each assessment align with popular cybersecurity frameworks, helping your teams track their third-party risk metrics and identify any compliance gaps.
Real-World Application (Risk Control & Collaboration)
A financial institution uses a VRM solution to automate the entire assessment lifecycle. It sends a custom questionnaire to a new critical software provider. The results of the assessment are automatically mapped to the NIST Cybersecurity Framework, immediately revealing a significant compliance gap related to encryption standards. The VRM solution not only tracks the third-party risk metrics but also forecasts security posture improvements based on the proposed remediation tasks, helping the security team focus on exposures with the highest potential detriment. This collaborative workflow ensures the vendor meets security standards before final contract approval.
3. Code verification
Poor code practices in vendor software result in vulnerabilities that could facilitate supply chain attacks. Cybercriminals are usually already exploiting an exposure before it's published by the CVE database. To rapidly discover coding vulnerabilities before they're exploited by threat actors, code verification solutions should be added to your supply chain risk management portfolio.
Tool Mapping
Code verification solutions, Veracode and IBM AppScan.
Real-World Application (Risk Control & Efficiency)
A manufacturing company is integrating a new Supervisory Control and Data Acquisition (SCADA) system from a third-party vendor. Before deployment, they use a code verification tool (Static Application Security Testing/SAST) on the vendor's application source code. The tool flags multiple instances of insecure data handling and poor code practices that could lead to a buffer overflow vulnerability. By rapidly discovering these risks at the development stage, the company requires the vendor to remediate the issues immediately, preventing a zero-day supply chain attack and avoiding the costly and time-consuming process of patching a critical system after it has already gone into production.
4. Geopolitics
Geopolitical disturbances have a direct impact on the continuity and security of supply chains. By monitoring geopolitical data, you can detect potential disturbances to raw material availability or security and implement preemptive actions, thereby preserving the integrity of supply chain operations.
Tool Mapping
Geopolitical solutions (e.g., GeoQuant).
Real-World Application (Visibility & Efficiency)
An automotive manufacturer sources rare-earth metals from a country experiencing rising political tensions. The geopolitical intelligence solution, GeoQuant, flags a significant increase in the political risk index for that region. This early warning allows the manufacturer to implement a contingency plan—shifting a portion of their sourcing to an alternative, stable region—before the geopolitical events cause material shortages or spikes in pricing. This preemptive move preserves the integrity of supply chain operations and mitigates potential financial risks associated with disruptions.
