Lack of supply chain risk mitigation strategies is a big gamble

New report from the Global Supply Chain Institute found that 90% of firms do not quantify risk when they are outsourcing production
Lack of supply chain risk mitigation strategies is a big gamble

A survey from the Global Supply Chain Institute has found that nine out of 10 companies do not have a supply chain risk mitigation strategy in place when outsourcing production.

Managing Risk in the Global Supply Chain revealed that only one quarter of a company’s end-to-end supply chain is being assessed for risk. Fifty percent of respondents also admitted they have no backup plans for a distribution centre shutdown.

The study, which was based on responses from 150 US supply chain executives, discovered on average that 38 percent of suppliers were single sourced. However, just 14 percent of transport carriers surveyed said that they single sourced suppliers.

Reasons cited by respondents for single sourcing included “one supplier has a significantly lower cost and/or higher quality”, “we’ve always done business this way”, and “no other supplier can adequately satisfy the need”.

In addition, the survey showed on average around 49 percent of companies had suppliers who were able to continue working despite a disaster in their location, and 51 percent were not able to do this within a “reasonable time frame”.

According to the report, respondents top supply chain risk concerns were quality problems, closely followed by the necessity for increased inventory due to longer supply chains, and the possibility of natural disasters.

The number one risk mitigation strategy chosen by respondents was selecting strong suppliers. Compressing shipping and cycle times using lean principles and the use of visibility tools were also high up the list. 

Speaking to Supply Management, Paul Dittmann, executive director of the Global Supply Chain Institute at the University of Tennessee, said: “We were surprised by some of the findings regarding the lack of mitigation strategies.

“Any business that does not have some basic form of risk mitigation plans in place is simply gambling with its existence."

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by Laura Stackhouse

readmt.com Editor

Laura Stackhouse is the Web Editor of readmt.com, an official publication of the International Marine Purchasing Association (IMPA). To discuss news, features or contributing to readmt.com please get in touch.

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