Welcome to GUARDIAN!
The energy storage market and its supply chains are global. China’s history of market manipulation for geopolitical purposes and domination in the energy storage industry market and supply chain pose a substantial risk to United States-based businesses operating within this supply chain.
Geopolitical instability, supply chain disruptions, and rising capital costs are substantial risks start-ups face in standing up and scaling new supply chains. Not addressing supply chain risks has affected other companies like Automotive Energy Supply Corporation (AESC) and Northvolt AB and resulted in delays, paused construction, and bankruptcy.
Start-ups looking to grow into major companies must continuously evolve their supply chain risk management practices to avoid supplier disruptions that would discourage investors. The aim of this tool is to support a robust domestic energy storage supply chain by helping companies learn to develop effective mitigation strategies, improve the ability to detect early warning signs, and strengthen organizational resilience during times of growth.
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Select your Technology Readiness Level (TRL)
This Material is based upon work on the Upstate New York Energy Storage Engine supported by the National Science Foundation under the NSF Regional Innovation Engines Program. Any opinions, findings and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Science Foundation.
TRL 3-5 Supply Chain Risk Assessment
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Questions
Recommendations
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1
Are you part of an organization that has visibility into your supply chains by either knowing Tier 2 and 3 suppliers or having insight into geographic locations where materials are sourced?
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How do you manage relationships with key suppliers?
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What plans do you have in place to mitigate supply chain disruptions?
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How well do you understand the geopolitical risks associated with your foreign suppliers?
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Are any of your suppliers headquartered in, producing in, or have significant influence from Foreign Entities of Concern (FEOC)?
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How diversified is your supplier base?
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How do you ensure compliance with relevant supply chain regulations and standards?
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How prepared is your project to respond to a major supply chain disruption such as stoppage or sudden loss of a supplier?
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9
How does your organization manage or mitigate price fluctuations or significant price changes?
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10
How do you evaluate the performance and reliability of your suppliers?
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11
How are you currently developing your workforce around supply chain management?
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12
How does your organization secure key intellectual property such as patents or methods?
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1
Enhance Communication with Suppliers
Justification: Developing strong relationships with key suppliers helps build trust and collaboration, leading to better service, clearer communication, and shared benefits for both parties. It also reduces the risk of strained supplier relationships and ensures problems are identified and resolved quickly, helping to avoid supply chain disruptions.
Actions:- Explore resources available through your university or organization that offer templates or guidance on building stronger supplier relationships. In lieu of university support explore available supplier relationships guidance from professional organizations like Chartered Institute of Procurement and Supply (CIPS) Guidance on Managing Supplier Relationships.
- Establish regular communications with your suppliers.
- If this represents a significant operational shift, consider starting with key suppliers or ones with known issues.
- Establish a clear plan for interacting with suppliers and implement strategies to improve working relationships.
- Identify industry events and organizations, like New York Battery and Energy Storage Technology (NY-BEST) Consortium, Battery Council International (BCI), and NAATBatt, that support supplier and stakeholder connections.
- Make sure roles and responsibilities are clearly communicated in the plan (i.e., role of product manager as a liaison between suppliers and internal teams).
- Discuss and document expectations and Key Performance Indicators (KPIs) aligned with the supplier’s contract on important items like delivery times and quality.
- Be mindful of cultural differences with global suppliers such as differing time zones, holidays, and business days.
- Monitor communications with suppliers and potential suppliers to identify and address any risks or issues that arise, this includes addressing supplier concerns.
- If looking for new suppliers consider battery specific supplier databases like NY-BEST Supply Chain Database, Li-ion Battery Supply Chain Database, or more generally the NIST MEP Supplier Scouting Service.
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2
Increase Supply Chain Visibility
Justification: Insight and tracking of supply chain materials enables analysis of trends from suppliers and reduces the risk of supply chain disruptions going unnoticed until they impact operations.
Actions: Use basic digital tools or spreadsheets to track the flow of materials and components.- Create a prioritized list of key materials and components critical to product development, based on their impact on production and timeline.
- Document instances where specific suppliers are necessary for quality/impurity/morphology constraints.
- Explore resources available through your university or organization that can provide templates or guidance on supply chain visibility, such as The Council of Supply Chain Management Professionals (CSCMP) or other professional supply chain organizations provide resources, experts, and training on the benefits of supply chain visibility for improving efficiency and reducing risks.
- Choose a tool such as Excel that can be easily shared within your team for collaboration.
- Create a tracking template with items like supplier name, quantity ordered, date ordered/expected delivery/actual delivery, delays/issues, etc.
- Establish roles and responsibilities for regularly updating and tracking using this new tool.
- Regularly review and monitor the tool to identify trends, common issues across suppliers, and improve efficiency and accuracy.
- As the company matures, consider using more advanced supply chain tracking software to automate data collection.
- Ensure the process is clearly documented and employees are regularly trained in their roles and responsibilities.
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3
Basic Risk Management Strategies
Justification: Creating basic risk management processes within your organization will enable proactive strategies to prevent or reduce the risk of being unprepared for supply chain disruptions, leading to potential operational and financial impacts.
Actions:- Explore resources that may be available through your university or larger organization that can provide templates or guidance on risk management or supply chain risk management. Some publicly available templates and guidance include:
- NIST MEP Small Manufacturers Can Implement Risk Management Strategies
- NY MEP Supply Chain Maturity Assessment
- Office of the Director of National Intelligence Framework for Assessing Risks
- CISA Vendor Supply Chain Risk Management Essentials
- Develop informal risk management practices to identify key risks and create mitigation strategies.
- Create or identify a team to manage risk management activities.
- Develop a process and tool to track and prioritize risks. To start, try to tailor online tools like FEMA Ready Business Risk Assessment Tool or Smartsheet Free Supply Chain Risk Assessment Template.
- Ensure you promote a culture where risks can be discussed.
- Identify specific strategies to mitigate large disruption risks (e.g., back-up supplier strategy or creating a safety stock of critical materials).
- Mature risk management practices over time creating formal risk management plans, contingency measures, and training for staff.
References/examples: -
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Increase Awareness of Geopolitical Risks
Justification: Comprehensive, consistent monitoring of geopolitical risks related to tariffs, conflicts, and intellectual property can bolster an organization’s strategic positioning to better respond to risk and maintain operational, economic, and reputational integrity. While organizations and startups in TRL 3-5 are not operating at significant volume, developing awareness around geopolitical risks will matter for future supplier selection and production. Potential future customers may have requirements or strong preferences for US-based supply chains or evidence of fair-trade practices, that may need to be demonstrated before becoming a customer.
Actions:- Identify potential geopolitical risks for your supply chain, this could include:
- Evaluate the geographical distribution of suppliers to understand their risk of environmental, geopolitical, or logistical risk. Note any geographical clusters of suppliers.
- Review tariffs and trade policies that could have an impact on your supply chain. Use resources like Department of Commerce US and Foreign Regulations and Standards.
- Understand human rights and environmental concerns such as child and forced labor in the Democratic Republic of Congo (DRC) in cobalt production or Uyghur Forced Labor Prevention Act Entity List that directly impact the battery industry. For environmental concerns consider adhering to ISO 14001 on Environmental Management Systems or the OECD Handbook on Environmental Due Diligence in Mineral Supply Chains.
- Understand risks from foreign investors by reviewing National Counterintelligence and Security Center (NCSC) Venture Capital and Supply Chain Risk.
- Identify potential Foreign Entities of Concern (FEOC) in your supply chain.
- Incorporate customer requirements into geopolitical risks prioritization.
- Understand customer preferences: are current, future, or desired customers interested in or requiring domestic sourcing, ethical practices, or sustainability to do business? For example, US government customers may require meeting FEOC guidance or European customers require meeting EU Batteries Regulation.
- Use resources like the OECD Due Diligence Guidance to identify and understand the risks associated with sourcing minerals from high-risk areas.
- As geopolitical risks are identified select appropriate ways to evaluate the potential impacts and need for monitoring. This could include:
- Scenario Planning: develop several scenarios of geopolitical risks impacting the supply chain, create response plans to adapt operations.
- Geographical Assessment: evaluate the geographical distribution of suppliers to understand their risk of environmental, geopolitical, or logistical risk. Note any geographical clusters of suppliers.
- Risk Mapping: map out high-risk regions, considering factors such as political instability, ongoing conflicts, changing regulations, and shifting trade agreements.
- Membership in Trade Associations: organizations can participate in industry groups or trade associations that focus on geopolitical risk, tariff changes, and international trade policies. These associations typically provide insights, updates, and recommendations for navigating geopolitical tensions.
- Tariff Impact Modeling: modeling tools used to predict how tariffs will affect pricing, margins, and supply chains.
- Trade Policy Tracking: track changes in trade agreements to anticipate impact on internal operations.
Standards:- Society of Automotive Engineers: Developed standard on EV traceability
- Department of Commerce US and Foreign Regulations and Standards
- Section 301 of the Trade Act of 1974: U.S. imposed tariffs on a range of products including raw materials imported from China to address trade imbalances and concerns over intellectual property theft.
- DOE Guidance on Foreign Entity of Concern: Impose limits when an entity’s battery supply chain includes foreign entities of concern.
- California Transparency in Supply Chains Act (CTSCA): Companies must disclose efforts to ensure that their supply chains are free from human trafficking and forced labor.
- Section 307 of the Tariff Act of 1930: Prohibits the importation of goods made using forced labor
- International Labor Organization (ILO) Standards - Convention No. 138: Startups need to ensure their supply chains comply with the ILO's minimum age for employment and the prohibition of child labor.
- Fair Labor Standards Act (FLSA): The U.S. bans the importation of goods made with child labor.
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5
Conduct Due Diligence on Supplier Affiliation
Justification: Conducting due diligence on supplier affiliation enables you to identify risks related to improper foreign influence, connections to foreign entities of concern, or other affiliations that could pose legal, ethical, or reputational risks to your organization. By analyzing risk factors such as supplier's financial health, legal and compliance history, operational capacity, governance practices, corporate social responsibility policies and overall reputation, an organization is reducing the risk of any fines, penalties, loss of reputation or revenue associated with their operation.
Actions: Implement a due diligence process to assess the affiliations and backgrounds of your suppliers, focusing on identifying any connections to countries of concern. Consider potential customer requirements or preferences that could make your organization more competitive.- Define objectives and criteria for due diligence checks:
- Criteria will vary based on what is critical to your business. It can include factors such as compliance history, product quality, production capacity, financial strength, market reputation, social and environmental responsibility practices, among others. Tailor OECD Due Diligence Guidance to get started or the OECD Handbook on Environmental Due Diligence in Mineral Supply Chains.
- Due diligence criteria should account for the values and requirements of potential customers.
- Prioritize high risk areas that require more scrutiny.
- Assess risk related to foreign entities ownership or control, connections to restricted or sanctioned entities, cybersecurity risks, ethical concerns and document findings. Use DOE Foreign Entities of Concern Guidance on ownership and control from FEOCs. Morningstar is a free data source that provides public company data.
- Gather information such as locations, ownership details, parent companies, subsidiaries, key personnel, partnerships, etc. for key suppliers. Conduct background checks looking through publicly available and government sources, including U.S. Treasury’s OFAC Sanctions List, Department of Commerce Consolidated Screening List, BIS Entity List, and the Uyghur Forced Labor Prevention Act Entity List.
- Prioritize high risk suppliers and implement appropriate mitigation and monitoring to reduce risk exposure.
References/examples:- Duracell’s Due Diligence Process for Battery Materials Supply Chain: Duracell conducts risk-based supply chain due diligence on its battery material suppliers.
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Ad-hoc Crisis Response Planning
Justification: Supply chains are particularly exposed to crises from a variety of sources that range from a global pandemic to transportation failures that cause both short- and long-term disruptions to supply chains. Creating ad-hoc crisis response plans can help create flexible strategies to respond effectively to major supply chain disruptions that could lead to prolonged operational impacts.
Actions:- Explore resources that may be available through your university or larger organization that can provide templates or guidance on crisis response planning.
- Create a basic crisis response plan outlining key steps to take in the event of a disruption. Leverage NY-BEST Energy Storage Systems Safety and Best Practices, FEMA Business Response Planning Guidance, and the Leading Your Business During Disasters Checklist.
- Identify a crisis response team with representation from operations, supply chain, finance, and communications.
- Develop a short list of possible crisis scenarios that can be used as an example or to test plans. These scenarios should be reflective of common supply chain crisis such as: hurricane closing specific trade routes, labor shortage due to strike or other, key supplier loss, volatile market impacting prices or availability for critical materials. Leverage the FEMA Ready Business Risk Assessment Tool.
- For each identified scenario, outline quick response protocols. These should include immediate actions to stabilize the situation, such as contacting alternative suppliers or rerouting shipments.
- Create a communication plan for key internal and external stakeholders, leveraging identified communication channels and even pre-defined messages as appropriate.
- Discuss crisis response with key suppliers and coordinate communication plans in the event of a crisis.
- Define roles and responsibilities for each team member during a crisis and validate against the different scenarios and response protocols. Include roles and responsibilities around the rapid decision-making process that empowers the crisis response team to respond as new information becomes available.
- Conduct regular drills to test plans and ensure the crisis response team is prepared.
- Collect lessons learned and update plans as needed.
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Increase Regulatory Compliance Awareness
Justification: By increasing regulatory compliance, it is more likely that legal penalties, fines, and sanctions are avoided. Companies can also position themselves strategically to take advantage of tax credits or incentives. Non-compliance has the potential to present financial burden, legal issues, and harm a business’s reputation.
Actions:- Explore resources that may be available through your university or larger organization that can provide templates or guidance on compliance. NY-BEST Energy Storage Systems Safety and Best Practices Resource Library provides resources for energy storage codes and standards.
- Educate the team on relevant supply chain regulations and standards, possibly with the help of external consultants for initial guidance.
- Have awareness and collect information on International Traffic in Arms Regulations (ITAR), especially if you have a Small Business Innovation Research (SIBR) award.
- Educate the team on potential tax credits or incentives that exist in NY state and identify any programs of which you are eligible and submit qualification documentation.
- New York Energy Storage Program: provides product development and market readiness resources to organizations based in New York.
- Empire State Development (ESD) Incentives: provides a variety of tax incentives and grants to businesses in the state, particularly those that are involved in clean energy or manufacturing sectors like batteries.
- Ensure compliance with tax regulations and trade policies to avoid penalties and disruptions.
- Stay informed about changes in export controls that could affect the ability to source or sell products internationally.
- Consider creating a dedicated team to monitor evolving international trade policies and export regulations and assess policy impacts.
Standards:- ISO 9001: International standard that sets out the criteria for a quality management system, helping organizations meet customer and regulatory requirements
- ISO 14001: International standard developed by the IS) that outlines the requirements for an effective Environmental Management System (EMS) to minimize environmental impact and comply with environmental regulation
- UN 38.3 (Transportation of Dangerous Goods) : A United Nations regulation requiring lithium batteries to undergo a series of rigorous safety tests to ensure they can be transported as dangerous goods without risk of fire or explosion
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Use Stockpiling Strategies to Ensure Steady Supply of Inputs
Justification: Stockpiling and other inventory management strategies ensure that supply disruptions do not lead to development or production stoppages. If companies are unprepared for disruptions to availability or unexpected quality or composition changes by suppliers, they may face costly or time-consuming disruptions to product development or production.
Actions:- Perform analysis of key production steps to identify all relevant materials or other consumables used in the process.
- Identify chokepoints or other single points of failure where critical materials are required.
- Review production processes to identify areas where alternatives are not readily available.
- Conduct preliminary technoeconomic analysis to identify the largest in production activities to perform targeted monitoring for price volatility.
- Create and maintain an inventory system for all materials and components to track aspects such as expiration date and remaining availability.
- Develop and maintain a chemical hygiene plan to ensure safety of chemical storage.
- Assign management responsibilities for maintaining stock levels and timely orders.
- Begin record keeping to analyze material usage patterns to preemptively plan for purchasing.
- Review resources like Best Practices for Lab Inventory Management, which provides a description of the benefits of stockpiling in a research lab but does include ads for an inventory management software, and NY-BEST Energy Storage Systems Safety and Best Practices Resource Library, which includes a range of resources on Battery Energy Storage Systems (BESS) safety from introductory information to relevant research, applicable guides and protocols, training resources, and webinars on battery energy storage safety best practices.
- Perform routine checks of supplier lead times for key materials or components to provide early notice of possible delays.
- (If possible) Initiate efforts to explore alternative materials or component suppliers to assess their compatibility with existing production processes.
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Strategize Protecting IP
Justification: IP mitigation efforts ensure that innovation is legally protected, advance and maintain a company's security posture to secure it from threat, maintain competitive advantage, and decrease risk of legal disputes. Ultimately, strong IP mitigation efforts are essential to attracting investors and commercializing products.
Actions:- Review available resources on IP like UCSF Presentation on IP Strategy and The Role of IP Actions at Various TRL Levels to identify your organizations IP and potential avenues for protection.
- Develop methods to separate out process innovations vs materials innovations.
- Assess which processes are viable to protect.
- Assess the patentability of each innovation and file for a provisional patent application.
- Develop a licensing strategy.
- Use non-disclosure agreements when discussing ideas with potential collaborators, partners, or investors.
- Consider registering trademarks and securing domain names.
- Identify suppliers that have access to IP and include protections in supplier contracts or require suppliers to sign non-disclosure agreements.
- Incorporate IP protections into supplier evaluations or checks.
References/examples:- Panasonic Intellectual Property: Skip to “In-House Education and External Consumer Awareness-Raising”
- Panasonic Code of Ethics and Compliance: Breaks down compliance responsibilities in the company and possible consequences of violating compliance codes. Starting page 13 on “Our Company Assets and Information”.
Standards:- Uniform Trade Secrets Act (UTSA): Provides a comprehensive set of statutes to govern trade secret protection.
- Defend Trade Secrets Act (DTSA): Allows companies to seek legal remedies when their trade secrets are unlawfully obtained or used, especially in cases involving interstate or foreign commerce.
- United States Patent and Trademark Office (USPTO): The federal agency under the Department of Commerce and is responsible for granting U.S. patents and registering trademarks.
- (Trademarks) Lanham Act: Protects against consumer confusion regarding the source of goods or services. The USPTO is responsible for registering trademarks.
- Patent Cooperation Treaty (PCT): Allows battery startups to file a single international patent application that can be recognized globally.