Line up alternative suppliers, firms warned

24 November 2017

Global supply chain risk in quarter three of 2017 fell for the third time in a row, but still remains high, according to the latest CIPS Risk Index powered by Dun & Bradstreet.

Political uncertainty across the world, including in the US, UK and Germany, and natural disasters are holding the risk high, at 80.3 out of a maximum possible 100, down from 81.3 the previous quarter. Quarter four of 2016 holds the record for the all-time high of 82.6.

The index provides a quarterly analysis of the socio-economic, physical trade and business continuity factors contributing to supply chain risk across the world, with regions weighted according to the contribution to global exports of individual countries.

“In a period of prolonged supply chain risk, it’s crucial that businesses have a network of alternative suppliers when disruption inevitably hits,” warned John Glen, CIPS economist.

“Although supply chain risk has fallen for three consecutive quarters, it remains close to its all-time high and businesses must prepare accordingly.”

Political risk continues to threaten to spill over into the economy, said CIPS, particularly in the US, with the US threatening to pull out of a major trade deal with South Korea, and renegotiations of the North American Free Trade Agreement with Mexico and Canada taking place.

Nonetheless, North America’s contribution to global risk fell in quarter three, and despite the damage caused by Hurricane Harvey affecting local supply chains.

Western and Central Europe also saw a fall in contribution to global risk, attributed to a series of stabilising political outcomes, including the formation of a government in Macedonia and the end of street protests in Albania by the opposition Democratic Party.

Positive moves in EU trade agreements also contributed, with the EU Free Trade Agreement with Canada starting in September, and negotiations progressing with Japan and Indonesia, the report said.

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