The Ripple Effect

Supply chains are becoming highly sophisticated and vital to the competitiveness of many companies. But their interlinked, global nature also makes them increasingly vulnerable to a range of risks.

A number of internal and external forces are converging to raise the risk ante for global supply chains. Some are macro trends such as globalization and global connectivity, which can make supply chains more complex and amplify the impact of problems that may arise. Others stem from the push to improve efficiency and reduce operating costs. Although trends such as lean manufacturing, just-in-time inventory, reduced product lifecycles, outsourcing, and supplier consolidation have yielded compelling business benefits, they have also introduced new kinds of supply chain risk and reduced the margin for error.

In mid-2012, Deloitte which was recently named a Vanguard Leader, based on capabilities, by Kennedy in Supply Chain Risk Management Consulting* surveyed 600 executives at manufacturing and retail companies to understand their perceptions of the impacts and causes of these risks, the actions they are taking to address them, and the continuing challenges they face. Respondents represented large and small companies in a variety of industries, and from countries around the globe, with the majority located in North America, Europe and China.

The survey’s key findings include:

• Supply chain risk is a strategic issue
• Margin erosion and sudden demand changes often cause larger impacts
• Concern about extended value chain
• Supply chain risk management not normally considered effective
• Companies face a wide variety of challenges
• Many companies lack latest tools