Top Supply Chain Risks Identified

August 12th, 2008 at 07:41am David Bush - Iasta

Marsh Inc., the world’s leading insurance broker and risk advisor, has released a new study on the top supply chain risks that organizations face today. It is covered in an article on Supply Chain Brain and the full report is downloadable from Marsh.

Marsh identifies the top two risks as pricing increases and supplier disruption and specifically states, “These pricing concerns include global energy prices, global food prices, pollution-related regulatory actions, as well as significant labor and raw material cost increases in emerging market countries such as China and India. As a result, companies now are awakening to the realization that prices from lower-cost countries will not remain the same year-over-year. Already, some are shifting operations from China to countries like Vietnam, Thailand, and Malaysia to combat price inflation.

But these new destinations are also experiencing strong inflationary pressures and many have even higher risk levels for natural hazards, political unrest, logistics infrastructure failures, and product integrity challenges. Plus, tack on the rising price of fuel, which is significantly raising transportation costs and impacting the overall cost of goods sold.”

Identifying and managing supply chain risks is arguably, still in its infancy. A strong sourcing strategy upfront will help identify and address some of these concerns on both ends of the sourcing process. Developing a robust RFx which exposes some of these concerns, along with using advanced optimization to account for qualitative factors in post bid analysis, can be invaluable during the negotiation/award stages of the process.

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Entry Filed under: General, Global Supply Issues/Risk