Supply Chain Security: How It Works and Best Practices to Mitigate Risks

In light of the increasing number of supply chain attacks in 2024, it’s crucial to reassess our security measures. Given this rise, we can only imagine how much these costs might increase in future reports.

So, what will it take to improve supply chain security?

One challenge is that there isn’t a clear, shared definition of supply chain security. This area is very broad, covering everything from physical threats to cyber threats, protecting transactions, and safeguarding systems to managing risks with immediate business partners and beyond, including third, fourth, and additional parties. 

However, there is a growing agreement that supply chain security needs a well-rounded and coordinated approach.

In this blog, we will discuss supply chain security in general, focusing on the cybersecurity steps needed to protect the quality and delivery of products and services, as well as the important data, processes, and systems involved.

What is Supply Chain Security?

Supply chain security is a crucial aspect of supply chain management that focuses on mitigating risks associated with external suppliers, vendors, resellers, logistics, and transportation. It encompasses the potential threats of both physical and cyber attacks aimed at third parties, which are often seen as having less robust defences compared to the primary organizations involved.

Why is Supply Chain Security Important?

Supply chains focus on ensuring customers receive what they need at the right price, place, and time. Disruptions can risk product or service integrity, compromise data privacy, and disrupt transaction accuracy—leading to operational, financial, and brand impacts. 

Data breaches, ransomware, and malicious actions from both insiders and external attackers can affect any tier within the supply chain. Even incidents isolated to a single vendor or third-party supplier can significantly interrupt the critical “plan, make, and deliver” process.

Mitigating these risks is an evolving and complex task. Supply chains today are expansive, interconnected networks, comprising numerous third-party partners who need data access with strict control over visibility. Growing constraints on staff and budgets, as well as unforeseen shifts in strategy, partner dynamics, and the supply-demand balance, amplify the urgency and complexity. 

Moreover, increasingly informed and socially conscious customers and employees demand transparency and visibility into the products and services they engage with. Every touchpoint presents a new risk that requires careful assessment, management, and mitigation.

How Does Supply Chain Security Work?

Supply chain security safeguards both the physical integrity of goods and defences against cyber threats. Physical risks include threats such as theft, sabotage, and terrorism, which organizations can mitigate through measures like tracking and verifying regulatory documentation. 

On the other hand, cyber threats have become a primary concern in supply chain security, revealing vulnerabilities within IT and software systems through malware attacks, piracy, and unauthorized access.

Key Concerns for Supply Chain Security Leaders:

Supply chain leaders across industries have identified several pressing security concerns:

1. Data Protection

Securing data in business transactions, both at rest and in motion, is essential to prevent supply chain breaches and unauthorized access. Trusting third-party sources and verifying their authenticity is a crucial component of secure data exchange.

2. Data Locality

With critical data dispersed across multiple supply chain tiers, locating, classifying, and protecting data is essential. In regulated industries, compliance with varying regional mandates around data management is vital.

3. Data Visibility and Governance

Multi-enterprise business networks facilitate data sharing and collaboration, yet demand strict control over access permissions to ensure data governance and prevent unauthorized viewing.

4. Fraud Prevention 

Data changes hands numerous times within order-to-cash cycles, increasing vulnerability to tampering. Every exchange or shift within systems, whether digital or paper-based, can present a risk.

5. Third-Party Risk

Complex products and services often involve multiple supplier tiers, with each layer introducing potential vulnerabilities that need proper management to minimize exposure.

8 Best Practices in Supply Chain Security:

To safeguard supply chains, a layered, multifaceted approach is essential. Organizations are adopting a range of strategies to mitigate risks and manage security effectively:

1. Security Strategy Assessments

Conduct regular evaluations of security governance to assess risk and compliance. This includes reviewing data privacy policies, third-party risk protocols, and IT compliance to ensure alignment with business goals. Key steps include security risk quantification, program development, regulatory compliance checks, and ongoing training.

2. Vulnerability Mitigation and Penetration Testing

Regularly scan for vulnerabilities, address poor configurations, and secure supply chains and networks. Penetration tests uncover weaknesses across applications, infrastructure, and personnel, providing insights for bolstering defences.

3. Digitization and Modernization

Transitioning from paper and email-based transactions to digital processes strengthens security, reliability, and governance. Modernizing software and business processes allows for the adoption of encryption, tokenization, data loss prevention, and advanced access monitoring.

4. Data Identification and Encryption

Utilize data discovery and classification tools to locate sensitive data. Protect all data—customer, financial, inventory, IoT, and health—using encryption, real-time validation, and digital signatures to enhance data integrity.

5. Permissioned Data Exchange Controls

In multi-enterprise networks, secure information exchange is facilitated by user- and role-based access. Identity management, activity monitoring, and blockchain solutions enhance security by allowing visibility while reducing unauthorized access risks.

6. Trust, Transparency, and Provenance

Blockchain technology enables participants to monitor product provenance and quality while preventing data manipulation. This transparent tracking builds trust across the supply chain by maintaining immutable records.

7. Third-Party Risk Management

As interdependencies grow, end-to-end vendor and cyber risk management becomes crucial. Aligning internal teams with external partners allows organizations to assess and mitigate potential vulnerabilities, safeguarding critical assets.

8. Incident Response Planning

Preparing for breaches, shutdowns, and disruptions with a solid response plan helps prevent revenue loss and reputational damage. Practised, tested incident response protocols support quick, effective mitigation and prevent recurrence.

FAQ: Supply Chain Security: How Works and Its Best Practices:

What does global supply chain security mean?

Global supply chain security involves protecting the entire network of suppliers, manufacturers, and distributors from threats like data breaches, fraud, and disruptions, ensuring safe, reliable, and resilient operations worldwide.

How to reduce the risks of supply chain security?

Risks can be reduced by implementing strong data encryption, conducting regular security assessments, managing third-party access, and digitizing processes to enhance visibility, control, and prevent unauthorized tampering or data theft.

What is the biggest threat to supply chain security?

The biggest threat is data vulnerability, where weak points in data handling and sharing expose companies to fraud, breaches, and manipulation, especially when dealing with third-party partners or complex global networks.

Conclusion:

Supply chain security isn’t just about protecting products; it’s about fostering trust among everyone involved. By taking proactive steps to enhance security, companies show they genuinely care about their customers and partners. 

At Qodenext, we’re here to help businesses navigate these challenges with our innovative security solutions, ensuring a smoother and safer future for all. Let’s work together to make supply chains more resilient!