08 January 2004 | Simon Binns
Supply chains are increasingly vulnerable and at risk of disruption, according to a new report for the government.
Creating Resilient Supply Chains, published by the Cranfield School of Management for the Department of Trade and Industry, warns that recent trends such as global outsourcing and offshore manufacturing mean that supply chains now carry a high amount of risk that is neither understood nor properly managed.
The report notes that the well-known external dangers such as terrorist attacks, labour disputes and natural disasters still pose a threat.
But there is growing evidence that the structure of the supply chain itself is a source of significant risk.
Professor Martin Christopher, who carried out the research, said: "This is a widespread problem. Many companies simply lack awareness of where their organisations sit in the wider supply network.
"There is a short-sightedness that prevents companies from seeing beyond their first-tier supplier or beyond their immediate customers."
The study recommends that supply chains become more "agile": able to react quickly to unpredictable events.
To do so, there there must be more defined lines of communication in the entire supply chain.
Roger Stickland, an associate director at Cornwell Management Consultants, said that companies operating lean supply chains where they have stripped out excess capacity in assets and suppliers had made their supply chains less resilient to disasters.
"If a natural disaster or a so-called 'act of God' happens, it has often been treated as a one-off," he said.
"It should now be taken far more seriously, especially given the rise of terrorist activity. Any sensible business should take this into account, but where do you build in resilience? It is a very important debate."