FTSE 100 should focus more on supply chain issues

19 October 2011

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19 October 2011 | Adam Leach

Leading UK companies are not paying enough attention to supply chain issues in their financial reports, despite increased global volatility.

CIPS CEO David Noble has called on analysts and investors to increase pressure on companies to disclose more information about their procurement and supply operations in financial reports and updates. He argued that the increasingly volatile state of the global economy means risks are rising in the supply chain, which means more focus should be placed upon it.

The call follows research, carried out by CIPS, that found that while the prominence of procurement and the supply chain within FTSE 100 annual reports has increased, it has been outshone by areas such as CSR, risk management and sustainability.

The study found that over the past three years, the number of mentions of procurement, sourcing, purchasing and supply chain has risen by 14 per cent, while sustainability and risk management, for example, have increased by 78 per cent and 53 per cent respectively.

Noble said: “It’s clear that while companies may be managing their supply chains, they are not necessarily mentioning this in their reporting. Shareholders and analysts therefore need to encourage more transparency by interrogating companies about their supply chain risk.”

Nick Wildgoose, global supply chain product manager at Zurich Insurance, said: “Supply chains continue to increase in terms of importance to companies’ overall financial performance and reputation. This survey indicates that many companies are missing significant opportunities to improve performance through embedding supply chain management.”

Speaking at CIPS Conference 2011 earlier this month, Noble highlighted the crucial role that the Purchasing Managers’ Indexes (PMIs) can play in the global financial markets. He said the recent manufacturing PMI drove a “huge and significant shift” in the FX exchange. A jump in the pound, when compared with the US dollar, occurred because the manufacturing PMI was much better than expected.

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