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The Smart Cube Releases Survey Results: The Financial Health of Global Supply Chains is Among the Top Concerns for Senior-level Executives
LONDON – 12 August 2015: The Smart Cube, a global professional services firm specialising in custom research and analytics, released a supply chain study conducted with senior-level supply chain and procurement executives from leading global organisations. The survey results indicated that 69% of the surveyed executives are generally concerned about the financial health
of suppliers in their supply chain and see this as one of the largest risks in the next quarter. Other key concerns of supply chain executives include geo-political instability (46%), ethical risks (environmental, social, labor, corruption, etc.) (31%) and political risks (38%).
The majority of the executives surveyed also predicted that the regulatory environment will have a high impact on their supply chains and that outsourcing will substantially increase due to the need for more efficiency, reduction of costs, lack of capacity/resources and lack of capability/expertise.
The Smart Cube, which consults Fortune 500 companies on these types of issues daily, is recommending the following four key strategies to combat, if not mitigate, these risks:
- Avoidance: Typically, this strategy should be followed where the risk of operating in a particular market, or with a particular vendor or customer, is extremely high. This includes dropping certain geographical markets, suppliers, customers, or even operating segments.
- Control: This strategy should typically be followed to combat short- to medium-term risks, such as supply disruptions because of human error. Here, an organization tries to take charge of the situation through specific manageable actions. Some examples include managing inventory and production capacity and implementing contractual structures with suppliers.
- Cooperation: In this strategy, an organization tries to mitigate short- to medium-term risks by cooperating with external stakeholders, especially its suppliers. Some examples of strategic initiatives include preparation of joint business continuity plans and collaborated efforts to improve supply chain visibility.
- Flexibility: This strategy should typically be used for improving the overall efficiency of supply chain in the long run. Examples of strategic initiatives include local sourcing and multi sourcing. Multi sourcing, as an example, will help companies tackle multiple challenges—such as those pertaining to geo-political instability, supplier related risks and financial risks—in one go. By engaging multiple suppliers to deliver quality, price, and reliability requirements, companies can mitigate risks such as supplier bankruptcy or performance deterioration for
strategic categories that are critical to operations.