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The ripple effect
How manufacturing & retail executives view the growing challenge of supply chain risk
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.
“Modern business models are designed to have the most suitable supplier for each stage of manufacture. To support this, each organisation needs to have trust and understanding of all of the manufacturing and supplier stages prior to theirs. This is not easy and needs significant oversight when contracts are being drawn up with an on-going audit by independent teams that you can trust. The recent equine DNA issue was about integrity of supply but organisations need to be also vigilant in the future about supply outage which can have just as many negative impacts on a business,”
Colm McDonnell, Partner at Deloitte Ireland
A number of internal and external forces are converging to raise the risk ante for global supply chains. Some are macro trends such as globalisation 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.
Risks in extended value chain
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.
Interestingly, from an Irish perspective given the recent identification of equine DNA in food products, risks in the extended value chain were identified as the greatest concern in supply chain management.
- Supply chain risk is a strategic issue.
- Margin erosion and sudden demand changes often cause larger impacts.
- Supply chain risk management not normally considered effective.
- Companies face a wide variety of challenges.
- Many companies lack latest tools.
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