Executive Briefings

Supply Chain Executives See Risk Abating, But Remain Cautious in Some Areas

It appears supply chain executives are taking a collective sigh of relief as supply chain risk levels plunge quarter over quarter. In a recent survey of 115 global companies in retail and discrete and process manufacturing, AMR Research found that risk has decreased for a majority of companies. Where risk is still on the rise, the rate of increase is much slower.

"We're still faced with major risks, but things aren't as bad as they were last year," says AMR analyst Noha Tohamy, author of the report.

Supply chain security breaches top the list of risks that have seen the biggest increase from last year, indicating a growing problem for global supply chains, says Tohamy. "Efforts like the U.S. Customs and Border Protection agency's 10+2 Importer Security Filing are becoming, at minimum, a risk of noncompliance. More importantly, they also pose a very real risk of disruptions along the global supply chain," she says.

Risks due to natural disasters increased slightly. With the fall season ahead, and with the H1N1 pandemic's risk severity and impact still poorly understood, companies are concerned about their abilities to respond to natural disasters, says Tohamy. This is because these are the risks that are hardest to predict and therefore the most difficult to model and mitigate.

These stabilizing trends come after a very turbulent period. When asked supplier disruptions during the recent economic downturn, only 22 percent of respondents said disruptions had occurred with less than 10 percent of their supplier base. On the other end of the scale, 12 percent said more than half of their suppliers had experienced disruptions.

With respect to mitigation strategies, collaboration with trading partners tops the list for the fourth quarter in a row. Following collaboration is multi-sourcing strategies, performance-based contracts, and increase in IT investment. Interestingly, performance-based contracts have seen the biggest decline this year, indicating that performance hasn't been the primary culprit, but instead the macro conditions that impact suppliers and customers.

Nearshoring is the highest growth mitigation strategy this past year. In fact, it grew more than twice as much as the next strategy.

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It appears supply chain executives are taking a collective sigh of relief as supply chain risk levels plunge quarter over quarter. In a recent survey of 115 global companies in retail and discrete and process manufacturing, AMR Research found that risk has decreased for a majority of companies. Where risk is still on the rise, the rate of increase is much slower.

"We're still faced with major risks, but things aren't as bad as they were last year," says AMR analyst Noha Tohamy, author of the report.

Supply chain security breaches top the list of risks that have seen the biggest increase from last year, indicating a growing problem for global supply chains, says Tohamy. "Efforts like the U.S. Customs and Border Protection agency's 10+2 Importer Security Filing are becoming, at minimum, a risk of noncompliance. More importantly, they also pose a very real risk of disruptions along the global supply chain," she says.

Risks due to natural disasters increased slightly. With the fall season ahead, and with the H1N1 pandemic's risk severity and impact still poorly understood, companies are concerned about their abilities to respond to natural disasters, says Tohamy. This is because these are the risks that are hardest to predict and therefore the most difficult to model and mitigate.

These stabilizing trends come after a very turbulent period. When asked supplier disruptions during the recent economic downturn, only 22 percent of respondents said disruptions had occurred with less than 10 percent of their supplier base. On the other end of the scale, 12 percent said more than half of their suppliers had experienced disruptions.

With respect to mitigation strategies, collaboration with trading partners tops the list for the fourth quarter in a row. Following collaboration is multi-sourcing strategies, performance-based contracts, and increase in IT investment. Interestingly, performance-based contracts have seen the biggest decline this year, indicating that performance hasn't been the primary culprit, but instead the macro conditions that impact suppliers and customers.

Nearshoring is the highest growth mitigation strategy this past year. In fact, it grew more than twice as much as the next strategy.

Read Full Article