Widespread automotive recalls highlight global supply chain risks, says CIPS

Paul Snell is managing editor at Supply Management
22 May 2015

Relying on a handful of global suppliers for key components presents huge risks to businesses.

That’s the message from Duncan Brock, group customer relationships director, CIPS, following further recalls by car manufacturers to fix a problem with airbag inflators.

This week the US Department of Transportation said Takata, which supplies many of the major automotive firms, had acknowledged a defect in its airbag inflators. This will expand the recall in the US by 11 manufacturers to a total of 34 million vehicles.

“Another automotive recall once again highlights the perils of managing huge global supply chains ineffectively and without risk mitigation strategies in place,” said Brock.

“These are the high costs companies have to pay if there are supply chain failures. The main issue is that companies are increasingly relying on a handful of global suppliers for key components. This approach poses huge risks, as this recall clearly shows.

“At the companies involved, procurement teams chase round to trace all the affected products and address quality control. They will also be looking to rapidly replace stocks and, in the worst case scenario, look for new suppliers if they can't resolve these issues quickly.

He added that using long and complex supply chains, short development cycles and relying on a small number of suppliers means problems will continue.

“We very rarely seem to hear about shareholders and analysts interrogating companies about how robustly their supply chains are managed, yet this is one of the most important functions and biggest areas of risk a business has. This latest recall should at the very least start to prompt some searching questions and ask why quality is still in question – surely it is a fundamental requirement for any supplier to deliver to specification? Without doubt consumers will be asking themselves this.”

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