Supply Chain Security: Why It’s Important & 7 Best Practices

What Is Supply Chain Security?

A supply chain is the entirety of physical and software components involved in creating a product. Supply chain security is an aspect of supply chain management focusing on identifying and managing the security risks associated with external vendors, suppliers, transportation, and logistics.

The objective of supply chain security is to identify, evaluate, and mitigate risks that arise when working with third parties in the supply chain. It includes both digital and physical security aspects of software, services, and products.

Supply chain security best practices and guidelines may change based on the specific organization, with supply chains varying between groups. A comprehensive supply chain security strategy should implement risk management and cyber-defense in-depth principles. It should also address protocols established by government agencies such as the

Department of Homeland Security and customs regulations for an international supply chain.

This is part of a series of articles about third-party risk management.

Why Is Supply Chain Security Important?

The day-to-day operations of a supply chain are complex and require the accurate delivery of products and services at the right time. Organizations may have to deal with serious operational, financial, or reputational issues if something interferes with these processes.

The large scale of a modern supply chain increases the potential for security vulnerabilities to emerge at some stage of it, resulting in attack vectors across a large attack surface. Security management is more important than ever, given that a single security incident affecting a third-party vendor can have catastrophic consequences for other organizations further down the supply chain.

A limited skilled workforce, high connectivity, and inexpensive SaaS services compel vendors to meet the demand for more flexible and accessible operational and security controls.

For example:

• Hospitals use smart platform services and technologies to facilitate connections and efficiently process patient data.
• Retailers increasingly rely on third parties to deliver their services and products to consumers through just-in-time (JIT) delivery.
• Manufacturers outsource security operations center (SOC) activities to focus on manufacturing operations.
• Chemical companies hire outside engineers to address workforce shortages and access cyber skills.

This interconnectivity helps accelerate growth, but relying on third-party providers makes it difficult for organizations to know where their high-value assets are, who can access them, and what their dependencies are. The result is that an organization might not be prepared to effectively respond in the event of a breach.

Modern supply chains’ complexity and dynamic nature make it even more important to ensure supply chain security. Organizations must understand that their most important data and information protection management depends on who they work with and how well they secure their gateways, segment networks, and manage security risks.

Protecting an organization and managing supply chain risks is highly challenging but not impossible. It requires taking on a proactive role in the evolving supply chain and integrating it into the organization’s overarching risk management and security strategy.

7 Best Practices to Mitigate Supply Chain Security Threats

1. Mitigating Vulnerabilities and Penetration Testing

Vulnerability scans enable early detection of low-level vulnerabilities. The test results are also useful for ensuring more secure database configurations, updating weak passwords, and protecting endpoints and networks.

The early wins enabled by vulnerability mitigation reduce risk without increasing downtime or hindering productivity. Once the security team has covered the basics, a penetration testing expert or team can help identify more advanced threats within the supply chain and improve the overall security system.

2. Identifying and Encrypting Data

The National Institute of Standards and Technology (NIST) encourages businesses to establish security controls based on the assumption that data breaches are inevitable. Therefore, organizations must address every type of data they transmit or store.

A data discovery tool can help identify and categorize files containing sensitive financial data, proprietary information, and customer data. With a comprehensive view of all the company’s data, it is possible to secure valuable assets with advanced encryption.

With more businesses relying on online platforms and transactions, advanced controls such as digital signatures, multi-factor authentication, and session breaks can enhance supply chain security.

3. Establishing Controls and Visibility

A business network covering multiple enterprises ensures reliable and secure data exchange between partners, leveraging tools to control role- and user-based access. Identity and access management (IAM) security practices are important for securely sharing sensitive and proprietary information throughout a large and potentially disparate business ecosystem, reducing the risk of unauthorized access or compromise by identifying and remediating vulnerabilities. Monitoring database activity and privileged user access provides visibility, helping identify and resolve problems quickly. An alerting system makes security data more accessible.

4. Implementing a Digital Transformation to Secure the Supply Chain

Abandoning traditional processes and technologies such as fax, telephone, and email is a gradual but important transition. Migrating to a modern environment allows companies to establish secure data transfers within their group and with third-party businesses, suppliers, and customers.

Keeping supply chain processes and software up to date ensures effective data security using up-to-date encryption, tokenization, file access monitoring, alerting, and data loss prevention.

An enterprise-wide focus on digital transformation and growth helps ensure employees play a part in preventing fraud, assessing cybersecurity risks, and maintaining security awareness throughout the network.

5. Planning and Orchestrating Incident Response

It is important to prepare for breaches, shutdowns, or disruptions by establishing an effective incident response plan. A well-tested, practical, easy-to-implement response plan and deployable remediation actions help minimize revenue losses, reputational damage, and partner or customer churn rates.

Security intelligence and response planning provide the metrics for internal teams and external partners to make informed decisions to prevent the recurrence of incidents and attacks.

6. Managing Third-Party Risk

A growing number of companies within the supply chain are collaborating to use, transmit, and store data. Managing this complex risk environment requires improved visibility and consideration, as well as end-to-end management and protection capabilities.

Effective risk management involves sharing third-party risk assessments with stakeholders. Involving suppliers and partners requires breaking down the silos between business and technical teams. By working together, the teams can protect the most valuable assets in the supply chain.

Understanding third-party risk allows organizations to identify the potential impact on their operations due to inadequate monitoring, failure to comply with data security regulations, or publicized data breaches. Organizational buy-in at the executive level is critical to be sure third-party risk is top of mind and being taken seriously.

Related content: Read our guide to third party risk management

7. Managing the Internal Network

Recognizing the importance of an efficient internal supply chain for the final product is essential for smooth delivery to consumers. Your organization cannot produce products without raw materials from your external suppliers, but the internal processes will determine if the final product is ready for sale.

One major factor shaping the internal supply chain’s success is detailed planning - it lets you determine how to most effectively promote and create your product and ensure the production meets your deadlines. An in-depth plan should optimize operations to support a successful pipeline.

Optimizing and securing your internal network and supply chain helps you address unexpected issues, keep employees happy, and satisfy consumer demands. However, it also requires comprehensive visibility management.

Related content: Read our guide to supply chain risk