Buyers more reliant on critical suppliers

12 June 2018

Nearly half of supplier relationships are seen as critical by buyers, a risk analysis of European businesses has found.

The analysis found 47.8% of supplier relationships in the first quarter of 2018 were seen as either key or critical by the buyer, up from 46.4% at the start of the quarter. This follows a 6.7% rise in the same figure in the last quarter of 2017.

The retail sector saw the highest increase in its dependency on key suppliers, with the number of critical relationships increasing to 72.5%.

The increase indicated companies felt more dependent on their suppliers, and suggested a trend towards partnership relationships as opposed to transactional relationships, the joint report by Dun & Bradstreet (D&B) and Cranfield School of Management said.

The report also found the number of relationships with suppliers in high risk countries had increased to 22.8% in the first quarter of 2018, up from 20.6% the previous quarter.

The report analysed commercial data from D&B, including around 600,000 anonymised transactions between European businesses and their global suppliers. It rated risk by calculating the percentage of suppliers that were classed as key or critical, that posed a financial risk, that were based in high risk countries and that created a foreign exchange risk.

Across sectors there were significant differences in the level and types of supply chain risk, the report said.

While the construction sector reduced its risk, transportation saw an increase in all four metrics. The study said risk in transportation had increased 62% since October 2017, suggesting that “the sector as a whole might benefit from more systematic risk assessment in supplier selection”.

Dr Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield, said supply chains were “becoming longer, more fragmented and increasingly complex, increasing the level of risk exposure for businesses.

“Alongside natural disasters and geopolitical events like Brexit, there are also other relatively low profile events like fluctuations in exchange rates, changes to rules and regulations, or the bankruptcy of a key supplier that can impact organisations’ supply chains,” she said.

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