6 March 2013 — While supply chains are becoming highly sophisticated and vital to the competitiveness of many companies their interlinked, global nature also makes them increasingly vulnerable to a range of risks.

The Ripple Effect, a new Deloitte global survey of 600 executives from manufacturing and retail companies around the world, examines the growing problems associated with supply chain risk.

It highlights issues that may pose significant risks and proposes specific attributes that can help achieve supply chain resilience.

The survey’s key findings included:

  • 71 per cent of executives said that supply chain risk was important in strategic decision making at their companies.
  • Margin erosion and sudden demand changes cause the greatest impacts – which illustrates the extent to which the supply chain risk issue affects the “heart of the business.
  • Executives surveyed were more concerned about risks to their extended value chain—outside suppliers, distributors, and customers—than about risks to company-owned operations and supporting functions.
  • Two thirds of companies have a supply chain risk management program in place, but only half the surveyed executives believed those programs were extremely or very effective.
  • Executives cited a wide variety of challenges including problems with collaboration, end-to-end visibility, and justifying investment in supply chain risk programs, among others. However, no single challenge stood out, indicating the need for broad approaches.
  • Current tools and limited adoption of advanced technologies are often constraining companies’ ability to understand and mitigate today’s evolving supply chain risks.

The survey found a number of internal and external forces were converging to raise the risk ante for global supply chains.

“Some are macro trends such as globalisation and global connectivity, which are making supply chains more complex and amplifying the impact of any problems that may arise.

“Others stem from the never-ending 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.

“Because of the importance of supply chain management to companies’ success, supply chain risk events are having a profound effect and becoming more costly.”

The full report is available here.

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