Supply Chain Security Risks: How To Secure Your Supply Chain

Your business relies on a complex network of suppliers, vendors, and third-party services to deliver products to customers. While these partnerships help you scale efficiently and tap into specialized expertise, they also create potential security vulnerabilities that could disrupt your operations.

Supply chain security is the practice of protecting your business’s sensitive data from risks that originate with external partners—from cyber threats and counterfeit products to shipping theft and payment breaches. For small businesses operating on tight margins, a single security incident can damage customer trust and threaten your bottom line.

Explore the fundamental concepts of supply chain security so you can identify some of the most common risks facing ecommerce operations. With actionable strategies you can implement to protect your operations, customer data, and reputation, you can stay agile and compete in today’s fast-paced digital markets.

What is supply chain security?

Supply chain security encompasses the practices, policies, and technologies designed to protect your business from security risks originating in your network of external suppliers, vendors, and partners. For ecommerce entrepreneurs, this involves managing risks associated with everything from product sourcing, inventory management, and shipping and fulfillment to payment processing and customer data handling throughout the supply chain lifecycle.

It’s a delicate ecosystem, where even seemingly small vulnerabilities can have an outsized impact. As Erin Chiang, supply chain planning lead at Shopify, explains, “The way I see it is, anything that impacts predictability can disrupt any step within the supply chain process. And any interruption creates a ripple effect and disrupts the whole process.”

For ecommerce businesses operating on thin margins and depending on customer goodwill and trust, understanding and implementing strong supply chain security isn’t just a best practice—it’s crucial for protecting business continuity, customer relationships, and long-term profitability.

5 common supply chain risks

1. Compromised suppliers
2. Software vulnerabilities
3. Counterfeit products
4. Logistics and shipping vulnerabilities
5. Payment processing breaches

Supply chain security risks manifest in numerous ways, each presenting unique challenges for ecommerce businesses and entrepreneurs. The interconnected nature of modern supply chains means that disruptions can have cascading effects across your entire business—and even the broader market.

“A supply chain is like one continuous thread or spool that just keeps going in a circle, keeps threading, and it goes from suppliers to manufacturers, transportation and warehousing, all the way down to the customer,” Erin says. “It’s this never-ending feedback loop.”

Common risks that can affect the continuity of this loop include:

1. Compromised suppliers

Compromised suppliers represent one of the most significant supply chain threats facing ecommerce businesses. When suppliers fall victim to cyber threats, experience financial difficulties, or encounter operational problems, these issues can directly impact your ability to fulfill customer orders. Such incidents can occur when suppliers lack adequate security best practices or fail to implement proper risk management procedures—for example, failing to secure warehousing facilities against theft, improperly vetting wholesale goods or components, or using outdated payment processing equipment or software systems that expose customer financial data to breaches.

Good supplier relationships with open lines of communication are perhaps the most crucial supply chain security assets for any business, Erin says. “Having those deep connections with the supplier to make sure that everyone is fully abreast of something—if anything happens, having that supplier transparency so you can get ahead of it is so very important.”

2. Software vulnerabilities

Software supply chain attacks occur when bad actors inject malicious code into applications developed by trusted vendors. These attacks can occur through hijacking updates, compromising source code repositories, or introducing potential backdoors into software components. Vulnerabilities like these give cyberattackers an entry point to gain access to customer networks and disrupt operations.

3. Counterfeit products

Counterfeit products pose another risk to ecommerce supply chains. These dupes can enter your inventory through compromised vendors or unauthorized sellers, potentially exposing your business to both reputational risk and legal liability. Inadequate supplier vetting and product authentication processes are often the chief causes of these security issues.

4. Logistics and shipping vulnerabilities

Vulnerabilities in your logistics and shipping operations create opportunities where products can be stolen, tampered with, or delayed during transportation. These physical threats can occur at any point in the fulfillment process, from warehousing to final delivery.

Common examples include organized cargo theft targeting high-value shipments, as well as individual package theft from delivery trucks—or even from customer doorsteps. Such incidents create both direct financial losses from shrinkage and customer service challenges when orders fail to arrive as expected.

5. Payment processing breaches

Payment processing beaches occur when cybercriminals target the systems that handle customer payment information during online transactions. These attacks can happen at integrated payment processors, within ecommerce platforms themselves, or through compromised third-party checkout services. When successful, such breaches expose customer credit card numbers, billing addresses, and other sensitive information, potentially resulting in significant financial losses, regulatory fines, and loss of public trust in your brand.

How to secure your supply chain

• Limit access
• Hunt threats
• Scan for vulnerabilities
• Segment data
• Seek accredited and certified partners
• Monitor continuously

Protecting your supply chain requires a multilayered approach combining vendor management practices with internal operational security measures. Business owners and security teams must work together to implement security measures, addressing both physical and digital vulnerabilities throughout the supply chain lifecycle.

The following strategies are essential tools for mitigating supply chain threats and maintaining long-term, predictable control over your ecommerce business operations:

Limit access

Implementing strict access controls is one of the most effective practices for protecting supply chain integrity. Employees and vendors should only access the systems, inventory, and customer data they need for their specific work responsibilities.

Also known as the principle of least privilege, this approach involves carefully managing permissions for both staff and external partners, ensuring that third-party suppliers and service providers cannot gain unauthorized access to sensitive systems and information beyond the scope of their work. Business owners regularly audit access permissions and implement robust authentication mechanisms (such as multifactor authentication or SMS verification) to prevent unauthorized access to critical inventory management systems and customer information. 

Hunt threats

Protective monitoring involves continuously watching for signs of compromise or suspicious activity that may indicate a supply chain security incident. This proactive approach includes analyzing shipping data, examining customer feedback for potential product quality issues, and investigating anomalies that might suggest the presence of counterfeit products or compromised suppliers in your supply chain.

Scan for vulnerabilities

Protecting web applications and software systems requires implementing comprehensive application security measures. This includes deploying vulnerability scanners to identify security weaknesses before they can be exploited. A vulnerability scanner is a software tool that automatically identifies security weaknesses in systems—software vulnerabilities like code misconfigurations or outdated software versions. These scanners generate reports of potential security risks and help you proactively address issues before they become serious problems.

Segment data

Data segmentation is the practice of creating barriers that limit the potential impact of operational disruptions, including supply chain compromises. By isolating critical systems and sensitive customer data from less secure components, you can contain potential breaches and prevent attackers from moving throughout your entire operation.

This practice might involve separating customer databases from inventory systems, isolating payment processes from other business functions (or using processors that anonymize customer data), and implementing controls that restrict communication between different segments of your operations.

For example, you might ensure that your outsourced customer service team can view order details and shipping information without accessing customer payment data or credit card numbers. This sensitive financial information would be restricted to only your finance team and payment processor.

Seek accredited and certified partners

Working with accredited and certified suppliers significantly reduces supply chain security risks by ensuring external partners adhere to established security standards and industry best practices. Evaluate potential suppliers based on certifications, compliance with industry standards, and demonstrated commitment to quality and security practices. This could include assessing manufacturing processes and quality control procedures, or reviewing financial reports to verify they have sufficient funds to maintain operations.

Contractual agreements help ensure the integrity and reliability of supplier relationships throughout your supply chain by providing legal protections and establishing clear expectations. This practice helps prevent disputes and provides recourse when suppliers fail to meet agreed-upon standards. “What we typically like to do on the supply chain side is, before you even purchase anything from a supplier, you agree on expectations and service levels upfront,” Erin says.

Partners that provide key supply chain software products should implement development security operations (DevSecOps) practices throughout their software development cycle. This ensures software security is built into every stage of development, integrating security considerations from initial design through deployment and maintenance and helping prevent the introduction of vulnerabilities into software systems that might be exploited by supply chain attackers.

Monitor continuously

Regular security assessments—including supplier audits and inventory verification—help identify weaknesses in supply chain security before bad actors can exploit them. Assessments should cover both internal operations and the security practices of key suppliers and logistics partners. Schedule quarterly or annual supplier audits that include on-site visits to manufacturing facilities, reviews of financial statements, verification of security certifications, and product testing. “At Shopify, everything we sell, we for sure get samples of them to do testing in real life,” Erin says. “That is a no-brainer.”

For key suppliers, require them to complete annual security questionnaires covering facility security, employee training, and data protection practices. Internally, conduct monthly inventory reconciliations that can help you catch indicators of theft or tampering. You should also maintain awareness of emerging supply chain threats and supply chain attack techniques by following industry trade publications and regularly consulting with security experts (especially if you lack in-house expertise).