Purchasers fall short on supply chain risk

18 January 2010

19 January 2010 | Jake Kanter

Buyers are not doing enough to alert senior management to supply chain risks, according to experts.

Risk consultants told SM that purchasers are too focused on costs and are not using market information effectively at a time when potential supply chain disruption is close to hand.

Alan Day, managing director of consultancy State of Flux, said purchasing departments do not have the skills to run and interpret market intelligence surveys, hampering their ability to pass on risk warnings. Buyers have a poor line of communication with the executive board, he added.

“Supply chain professionals need to think about supply chain risks and not just about driving down costs,” added Martin Caddick, head of risk and continuity management at PricewaterhouseCoopers.

It follows the publication of two damning reports on supply chain risk management last week. The first, by research company Mactavish, found that big UK companies have a poor understanding of risk they have acquired during the recession.

Interviews with senior figures at more than 250 firms showed they did not fully recognise dangers, such as supplier failure, with many focused on cutting costs and restructuring processes.

In the US, Fortune 1,000 firms are also failing to take the issue seriously, according to a separate study by technology firm Aravo. More than half of buyers and other executives at over 200 companies kept less than 20 per cent of their supply base under active risk management.

This was despite over 71 per cent reporting that the danger of vendors going out of business was their biggest concern.

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