Financial health of suppliers biggest worry for global executives

17 August 2015

The financial stability of suppliers was the biggest concern for senior-level supply chain and procurement executives from global businesses responding to a survey.

In the study by The Smart Cube, 69 per cent said they were generally concerned about the financial health of vendors in their supply chain and saw this as one of the largest risks for their company in the next quarter.

Geopolitical instability was the next most cited concern (by 46 per cent of respondents), followed by ethical risks such as environmental, social, labour and corruption issues (31 per cent) and political risks (38 per cent).

Most predicted that the regulatory environment would have a high impact on their supply chains and said outsourcing would increase substantially due to factors including the need for more efficiency, reduction of costs, lack of capacity and resources and lack of capability and expertise.

The Smart Cube recommended four key strategies to tackle the concerns. They include dropping geographical markets where the risks of operating are extremely high, managing inventory and production capacity and implementing contractual structures with suppliers, where risk is short to medium-term.

Cooperating with external stakeholders to prepare joint business continuity plans and collaborating to improve supply chain visibility, were also recommended, along with longer-term strategies such as multi and local sourcing.

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