In the current uncertain economic and political environment, businesses of all sizes face increasing global and domestic risks in their supply chains. A recent report found global supply chain events such as natural disasters, trade wars and new regulation increased by 36% in 2018, adding to the pressure on procurement professionals to manage risk and avoid disruption.
The quarterly Global Supply Chain Risk Report, published by Cranfield School of Management and Dun & Bradstreet, investigates the level of perceived supply chain risk faced by European companies with international supplier relationships. The data analysed suggested that companies have been taking a more cautious approach to supply chain management over recent months.
The latest data for Q4 2018 shows a decreasing trend in sourcing from high-risk countries, largely driven by an uncharacteristic 25% drop in the manufacturing sector and decreases in the wholesale, retail and finance sectors. This reduction suggests companies are adopting a more cautious approach to buying from higher-risk regions and offshoring to low cost economies. Concerns about rising costs and political instability, especially around Brexit, may also be driving businesses to look more to domestic suppliers and investigate new suppliers in non-traditional markets.
Businesses are also more concerned about their increased dependence on critical suppliers. Supplier criticality risk dramatically increased in the construction and infrastructure sectors by 40% and 85% respectively in Q4. These results suggest that buying companies feel more dependent on suppliers and limited in their choice of suitable sourcing options. At a challenging time for the retail sector, resulting in string of high street closures, buyers in this sector continue to have the highest perceived level of dependence on their suppliers, with 89% of relationships in Q4 2018 categorised as ‘critical’ or ‘key’.
The quarterly Global Supply Chain Risk Report uses four key metrics – supplier criticality, supplier financial risk, global sourcing risk and foreign exchange risk – to assess overall supply chain risk and provides businesses with a view of trends within their industry sector and the wider economy. By analysing trends by sector, the report highlights areas for monitoring and consideration in procurement decisions.
Analysis in the Q4 2018 report was carried out using proprietary commercial data supplied by Dun & Bradstreet, which included around 200,000 transactions between anonymous European buying companies and their suppliers in more than 150 countries worldwide.
This is a guest blog by Chris Laws, Head of Global Product Development, Supply & Compliance at Dun & Bradstreet