Executive Briefings

Most Organizations Lack 'Mature' Supply Chain Risk Management Practices, Study Finds

Only 41 percent of companies surveyed are considered to have "mature" supply chain risk management processes, but nearly four in five mitigate against disruptions by implementing a dual sourcing strategy, according to a recent report.

The Massachusetts Institute of Technology's Forum for Supply Chain Innovation recently released a report, titled 2013 Global Supply Chain and Risk Management Strategy, which "validated those companies with mature risk processes perform operationally and financially better. Indeed, managing supply chain risk is good for all parts of the business - product design, development, operations and sales."

The report was written in collaboration with audit and consulting firm PricewaterhouseCoopers. It was based on a survey of 209 participants whose firms have a "global footprint." Nearly a third (30.6 percent) were in automotive and industrial products, 20.6 percent were in pharmaceuticals and chemicals, 19.1 percent were in technology and telecommunications, 18.2 percent were in retail and consumer goods and 11.5 percent were in the service industries.

Respondents were asked how their firms mitigate against disruptions. A large majority (82 percent) said they create and implement a business continuity plan, 79 percent said they implement a dual sourcing strategy, 78 percent use both regional and global suppliers, 59 percent establish distribution centres in multiple regions and 48 percent use a component substitution strategy.

The researchers also asked the participants about the sources of risk to their supply chains. Multiple responses were permitted. About half (53 percent) said raw material price fluctuations were sources of risk, 47 percent identified currency fluctuations, 34 percent identified environmental catastrophes, 28 percent identified raw material scarcity, 22 percent identified geopolitical instability, 22 percent identified supplier partner bankruptcy, 20 percent identified change in technology, 12 percent cited unplanned IT interruptions and 5 percent identified telecommunications outages while only 2 percent identified cyber-attacks as sources of risk to their supply chains.

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The Massachusetts Institute of Technology's Forum for Supply Chain Innovation recently released a report, titled 2013 Global Supply Chain and Risk Management Strategy, which "validated those companies with mature risk processes perform operationally and financially better. Indeed, managing supply chain risk is good for all parts of the business - product design, development, operations and sales."

The report was written in collaboration with audit and consulting firm PricewaterhouseCoopers. It was based on a survey of 209 participants whose firms have a "global footprint." Nearly a third (30.6 percent) were in automotive and industrial products, 20.6 percent were in pharmaceuticals and chemicals, 19.1 percent were in technology and telecommunications, 18.2 percent were in retail and consumer goods and 11.5 percent were in the service industries.

Respondents were asked how their firms mitigate against disruptions. A large majority (82 percent) said they create and implement a business continuity plan, 79 percent said they implement a dual sourcing strategy, 78 percent use both regional and global suppliers, 59 percent establish distribution centres in multiple regions and 48 percent use a component substitution strategy.

The researchers also asked the participants about the sources of risk to their supply chains. Multiple responses were permitted. About half (53 percent) said raw material price fluctuations were sources of risk, 47 percent identified currency fluctuations, 34 percent identified environmental catastrophes, 28 percent identified raw material scarcity, 22 percent identified geopolitical instability, 22 percent identified supplier partner bankruptcy, 20 percent identified change in technology, 12 percent cited unplanned IT interruptions and 5 percent identified telecommunications outages while only 2 percent identified cyber-attacks as sources of risk to their supply chains.

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