Supply chain risk management has risen up the corporate agenda in 2009 as companies seek to protect themselves from the fallout of the economic recession, research suggests.
In a study of 100 organisations operating in Europe, Middle East and Africa, which were targeted due to their differing levels of maturity in relation to supply chain risk, 42 per cent of executives highlighted the issue as a priority for 2009, compared to 27 per cent a year ago.
The topic is also gaining prominence in the boardroom, with 16 per cent and 15 per cent of respondents respectively stating that ultimate responsibility rested with the board and the CEO. This compared with 7 per cent for both in 2008.
CPOs, however, remain the most likely to have ultimate responsibility, the survey found, with this being the case in 22 per cent of organisations.
“There’s a perception that companies are now susceptible to increased occurrences of supply chain interruptions,” said Finlay Murray, executive consultant at State of Flux, which carried out the research.
“It’s either happened to organisations or their customers or competitors so they have to ask what provisions they’ve made to mitigate this or manage given a supply chain interruption.”
The main risks to the supply chain were seen as supplier failure (including an inability to obtain trade finance), which was highlighted by 75 per cent of respondents, followed by a physical incident impairing supplier facilities (43 per cent) and quality failure leading to product recall or contamination (42 per cent).
The main risk management activities undertaken by the supply chain function were reviewing risks within contractual arrangements (73 per cent), better communicating expectations to suppliers (67 per cent) and auditing supplier performance (59 per cent).
But many organisations are ill-equipped to cope with the threat, the survey suggested.
Only 15 per cent of respondents said their company had complete visibility of suppliers’ supply chains and where they impacted their own operations, while 42 per cent reported that they had no specific metrics in place to measure the effectiveness of risk strategies.
“Companies seem to have business continuity plans in place but it tends to be more within their supply chain as opposed to looking right across their supply chain,” added Murray.
“To make this a success you need senior level sponsorship to address the lack of co-ordination between stakeholders and the disparate activities that are happening across the organisation.
“The key challenges companies are facing are where to prioritise their focus and what practical steps they can take.”
The most common means of assessing risk were to conduct a business impact analysis, cited by 57 per cent, followed by better and more frequent communication with suppliers (48 per cent) and supply chain risk mapping (43 per cent).
