Executive Briefings

Risk Mitigation in the Supply Chain: High Awareness, Little Action

There’s a significant gap between high tech companies’ assessment of risk in global supply chains, and their ability to respond to it.

Few would question the need for acquiring a keen awareness of the multitude of events that can disrupt a supply chain. The recent spate of natural disasters – earthquake and tsunami in Japan, floods in Thailand, an erupting volcano in Iceland – has driven home the importance of crafting and maintaining a strong risk-management effort.

Many high tech executives believe they’re doing a good job of prioritizing risk assessment. Nearly half view themselves as leaders in that area, according to UPS’s Fifth Annual Change in the (Supply) Chain Survey.

When it comes to reacting to events, however, the survey tells a different story. Fewer than a third of respondents who consider themselves to be leaders in risk assessment believe they are equally adept in the critical areas of response execution, risk mitigation and response planning, and event management and coordination. The numbers are even worse – a quarter or less – among those who are classified as fast followers, average and laggards.

Why are companies falling short on the execution front? Asked about their top areas of concern in risk management, 20% of survey respondents cited financial flow – possibly the result of a recent wave of cyber-security breaches. And 19% blamed regulatory complexity.

Long-term solutions will require a multi-pronged strategy. According to the UPS survey, 53% of high tech companies are working to improve collaboration with suppliers, while 40% are focusing on the enablement of better supply-chain visibility. Other “top three” strategies cited by respondents include implementation of supply-chain traceability, improvement in factory maintenance and oversight, and enhancement of reverse logistics and repair parts management.

As companies move to sharpen their risk-management skills, closing the gap between planning and execution will be a key priority.  Increasingly, they will turn to skilled and trusted experts, especially third-party logistics (3PL) providers, to help tackle the ever-growing complexities of global commerce. Together they can achieve a holistic view of the supply chain – one that addresses risk management from an end-to-end perspective.

There’s a significant gap between high tech companies’ assessment of risk in global supply chains, and their ability to respond to it.

Few would question the need for acquiring a keen awareness of the multitude of events that can disrupt a supply chain. The recent spate of natural disasters – earthquake and tsunami in Japan, floods in Thailand, an erupting volcano in Iceland – has driven home the importance of crafting and maintaining a strong risk-management effort.

Many high tech executives believe they’re doing a good job of prioritizing risk assessment. Nearly half view themselves as leaders in that area, according to UPS’s Fifth Annual Change in the (Supply) Chain Survey.

When it comes to reacting to events, however, the survey tells a different story. Fewer than a third of respondents who consider themselves to be leaders in risk assessment believe they are equally adept in the critical areas of response execution, risk mitigation and response planning, and event management and coordination. The numbers are even worse – a quarter or less – among those who are classified as fast followers, average and laggards.

Why are companies falling short on the execution front? Asked about their top areas of concern in risk management, 20% of survey respondents cited financial flow – possibly the result of a recent wave of cyber-security breaches. And 19% blamed regulatory complexity.

Long-term solutions will require a multi-pronged strategy. According to the UPS survey, 53% of high tech companies are working to improve collaboration with suppliers, while 40% are focusing on the enablement of better supply-chain visibility. Other “top three” strategies cited by respondents include implementation of supply-chain traceability, improvement in factory maintenance and oversight, and enhancement of reverse logistics and repair parts management.

As companies move to sharpen their risk-management skills, closing the gap between planning and execution will be a key priority.  Increasingly, they will turn to skilled and trusted experts, especially third-party logistics (3PL) providers, to help tackle the ever-growing complexities of global commerce. Together they can achieve a holistic view of the supply chain – one that addresses risk management from an end-to-end perspective.

Learn more about risk-management strategies by downloading the Change in the (Supply) Chain Survey.