Research shows more companies are supporting suppliers to safeguard supply chains
5th August 2009
New research shows that global companies are increasingly moving to support suppliers and safeguard their supply chains.
Supporting suppliers has become a critical supply chain issue for many global companies, according to a new study by consultants PRTM.
Global Supply Chain Trends 2008-2010: Extended Edition found that 75 per cent of participants say they have recently helped at-risk suppliers to ensure deliveries; 67 per cent are using new risk analysis tools to spot threatened suppliers early; 45 per cent say they have provided financial support to suppliers in the form of revised payment terms or risk financing.
Gordon Colborn, Director of PRTM’s Global Supply Chain Innovation practice admits to being a little surprised at the extent to which companies say they are supporting suppliers to maintaining liquidity. Risk in the supply chain is often talked about, but Colborn points out that in the past it has not been as critical as it is now and companies are having to re-examine long-held perspectives.
The trend over the past few years has been towards lean supply chains often with single sourcing and JIT delivery systems at the same time as rapid globalisation. Companies are now having to reassess these systems and consider the possibility that they might have gone too far.
“Risk assessment and mitigation are now top of the agenda,” Says Colburn, “Global companies can’t afford to have key suppliers go under. This is a major risk to supply chains.”
Companies are responding to this in the short term by working to understand risks in the supplier base better so that problems can be identified more effectively and dealt with before they lead to a crisis. In the longer term, Colborn believes risk will become a new area of focus, another measure of supply chain effectiveness alongside such things as on-time delivery or working capital.
“The recession has sharply degraded the reliability of demand and supply forecasts beyond a three-month window. This explains why more than half the participants say that supply chain flexibility is even more critical than just six months ago,” says Colborn. Many are redesigning their Sales & Operations Planning (S&OP) processes and embarking on initiatives to reduce product complexity as a result.
Expert taken from SupplyChainStandard.com