Supply chain risk falls, but businesses urged to remain vigilant

Paul Snell is managing editor at Supply Management
5 May 2014

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6 May 2014 | Paul Snell

Supply chain risk has fallen slightly from its all-time peak last year but businesses must remain vigilant about the threats it poses, according to the first quarterly Risk Index published by CIPS.

In the first quarter of 2014, the Index – where risk is rated between one and 100 - recorded a score of 79.8, compared with 82.2 in the final quarter of 2013. This was attributed to improved economic prospects in the UK, US and Germany, and stability in the major exporting economies of the US and China preventing a major increase. The Index was at its highest in the third quarter of 2013, with a score of 82.4.

The Index has been produced by CIPS in conjunction with Dun & Bradstreet (D&B) to highlight the need for a better understanding of supply chain risk management among UK businesses. It will be published on a quarterly basis.

Data from the past 20 years has been analysed to determine historical figures. The comparable score from 1994 was just 24.4, demonstrating the increasing exposure to supply chain risk businesses now face.

The Index assesses 132 countries – which account for more than 90 per cent of global economic activity – across nine categories such as economic outlook, market potential and insecurity/civil disorder. Countries are weighted based on the contribution they make to global exports, and a global reading is calculated from regional results.

“With political instability across the developing world, it is vital that businesses and economies recognise the risks to their supply chains and make the appropriate provisions before it is too late,” said David Noble, group CEO at CIPS. “Supply chains have a critical role to play in both operational profitability and economic stability. The Index provides a close examination of the global risks that need to be on the radar. Global supply chains have scarcely been at greater risk than today. Business leaders must sit up and take notice.”

The political crisis in Ukraine moved the country into the ‘very high risk’ category in the first three months of 2014. This uncertainty has been combined with widening deficits and accelerating inflation. An international bail out package is expected to provide stability, but structural reform is not guaranteed.

“Turmoil in the Ukraine and potential contagion to supply chains in Russia have dominated the headlines recently and for some companies it is only when the event occurs that they look to understand its impact and develop alternative supply options,” said Lee Glendon, supply chain risk specialist at D&B.

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