According to a study from AMR Research, China is the region that contributes the most risk to global supply chains. The survey, which asked 130 global companies to measure the levels of risk they face in their global supply chains, also found that volatile fuel, energy, and commodity prices are the top risk factors.
Survey respondents overwhelmingly chose China as the top contributing region for 9 of the 15 risks including intellectual property infringement, supplier and internal product quality failure, and security breaches.
"This creates a dilemma for many global companies. On one hand, they continue to enjoy the advantages of cheaper material costs and labor wages in China as well as the potential to reach vast consumer markets, but on the other they must continually reassess the pros and cons of operating in China," said Noha Tohamy, vice president of research at AMR Research.
The survey also revealed the following key findings:
The risk of product quality failure and intellectual property violations is growing--Companies must face the constant challenge of managing product quality across their global supply chains. The risk of IP infringement and the challenge to protect IP rights will only grow in the next few years.
Near-shore sourcing and manufacturing is increasing--The region that will witness the highest expected increase in manufacturing and sourcing activities is near shoring, at a ratio of 5 to 1. Respondents indicated they will increase sourcing and manufacturing activities in Eastern and Central Europe and India at a ration of 3 to 1.
Strategies to mitigate supply chain risk--The top three most successful strategies that companies execute in mitigating risk in their supply chains are performance-based contracts with suppliers or service providers, closer collaborative relations with trading partners, and dual/multi sourcing strategies and using redundant suppliers.
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