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Dark Supply Chains

The concept of a supply chain as it is now understood borrows heavily from military strategy, where those armies that could assure the supply of critical materiel when it was needed won wars and spared lives. As more and more organizations struggle to balance their unprecedented reliance on dispersed suppliers and customers – set against an increasingly volatile and interconnected risk landscape – business leaders must again turn to other sectors for answers. In order to understand how managing supply chain risk must evolve to keep pace with rapid change, it is useful to borrow some thinking from modern finance.

In the capital markets, dark pools or shadow banking are places outside of the regulatory purview and therefore the risk management range of market participants. The groups that benefit from being on the margins of modern finance, such as hedge funds, are the ones who manage obscurity in their favor. For this reason participants in financial dark pools or shadow banks often enjoy economic returns above other market participants. Their trading rules, investment horizons and goals are often different than those players competing in the light. While in finance the word ‘dark’ need not convey nefarious, there are other areas of the unregulated global financial system, such as terrorism finance, money laundering and crypto currencies, like Bitcoin, that are largely used by people with ill-commerce in mind who thrive under the cover of darkness.

The supply chain equivalent of a ‘dark pool’ is the entire sub-surface area of an organization’s supply chain, which people rarely think about. Every single touch point, node, supplier and customer entry point is also a point of vulnerability in a global supply chain. These points of vulnerability are growing exponentially with the proliferation of connected devices, sensors and the internet of things (IoT).

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