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Supply Chain Complexity Expands Risk

Everyone talks about risk in the supply chain, but the increasing complexity of it makes identifying and mitigating risks difficult.

In fact, almost half of executives are afraid that their supply chain risk management is only somewhat effective or has no impact at all, according to a recent survey from Deloitte. Said Kelly Marchese, principal at Deloitte Consulting LLP, in a press release:

Supply chains are increasingly complex and their interlinked, global nature makes them vulnerable to a range of risks. This increased complexity, coupled with a greater frequency of disruptive events such as geopolitical events and natural disasters, presents a precarious situation for companies without solid risk management programs in place.

Decisions around risk mitigation in the supply chain can make the difference between success and failure, and organizations know it. In counting the costs of risk events, 71 percent of those surveyed for Deloitte's research said that supply chain is an important part of strategic decisions. Poor decisions are likely to erode already thin margins or make suppliers unable to address sudden changes in demand.

A recent EBN poll bears out that this combination of complexity and risk are likely to create confusion in trying to tackle risk management. We polled readers, asking them to identify the single biggest risk to the global electronics supply chain. The results demonstrated that the industry is widely split on where to focus.

Uncertain economic outlook across the globe was a clear favorite in our poll, chosen by more than one third of those surveyed. However, the ability to find workers with experience and training around supply chain duties was the top pick for 19.2 percent.

Meanwhile, volatile fuel prices concerned another 16 percent, and nearly 15 percent were keeping a close eye on the potential risks created by a variety of global conflicts that includes political instability, trade tensions, and war.

Some in our community are skeptical that the global landscape is going to get easier. “While politics is being [sic] going through different states in some developing nations, few of these nations are gradually transitioning to stable political systems,” Wale Barare wrote to fellow community members after voting in the poll. He points to Ghana and Rwanda as positive examples. “I believe these two nations are prototyping for other Africa nations, while the majority either [are in the] work-in-progress or transformation stage.”

In reality, most supply chain experts will need to at least consider every possible type of risk. “There should be an option to select 'all,' ” EBN member Stock Keeper said about our poll. “They all seem very relevant.”

Of course, this is a discussion that we need to continue, and we will. Join us for an EBN webinar titled Facing Supply Risks: Korea, Europe, and Future Supply Chain Shocks. We'll be asking our panel of industry experts to dust off their crystal balls and take a guess at where the supply chain needs to head. The time and date will be announced soon.

3 comments on “Supply Chain Complexity Expands Risk

  1. Tom Murphy
    June 11, 2013

    Combined with Gerry Fay's post today, I'm getting the feeling that companies have a whole lot more risk planning to do.

  2. Hailey Lynne McKeefry
    June 11, 2013

    Sometimes the best way to approach a big problem is a little bit at a time. I came across a useful little offering called Little booklet of Risk Management Terminologies. I liked this because it brought it down to the basics adn seemed quite comprehensive.

  3. Tom Murphy
    June 12, 2013

    Thanks for that link, Hailey. Interesting book. I especially enjoyed the brief discussion of the proper way to plan for unplanned risks. 

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