Despite many recent advances, it’s fair to assume that there will always be some degree of supply chain risk in global sourcing models. As the political, economic and environmental climate continues to change around the world, experts predict that the ability to innovate will be essential for any business with global operations.
Here’s a quick look at why supply chain risk management should be a top priority in 2016 and beyond.
Supply chain risk by numbers
Global supply chain risk has decreased slightly for the first time in a year but remains in flux, according to the CIPS Risk Index (CRI) for Q3 2015. A CRI score of 79.1 was recorded between July and September, down from 80.1 recorded for the second quarter, but the score was still higher than 2014’s average of 78.5.
Financial risk represents one key issue. The slight improvement in the CRI score is thought to be the result of improving climates in western and central Europe, and healthy domestic demand in Canada and the US. However, the slowdown of the Chinese economy has negatively affected the scores of Australia, New Zealand and even sub-Saharan Africa, creating big ripples in the global economy.
Unforeseen natural events can also cause huge risks in the supply chain. For instance, Latin America has suffered growing problems due in part to poor weather conditions and natural disasters.
Finally, political risk is a big concern. Countries involved in the Ukraine conflict face ongoing concerns, and security concerns following terrorist attacks have caused a number of countries in the Middle East and North Africa to be downgraded.
Cheaper doesn’t mean better
Earlier this year, John Glen, chief economist for CIPS, explained: “For a long time we have taken for granted our interconnected world, enjoying its benefits for the most part. We are currently seeing the flip side of the coin.”
“Supply chain managers will need their wits and skills about them if these uncertain times are to be navigated expertly”, he continued. “An ability to interrogate and innovate to provide solutions for businesses and customers will be paramount if we are to keep global supply chains flowing.”
So what’s the solution to all this? Well, we believe that supply chain risk management can help companies to identify and address key hazards. Used alongside a reputable audit provider, Segura’s cloud-based software can monitor orders placed with approved suppliers and subcontractors, effectively minimising risk in the secondary supply chain.
“Strict adherence to best practice is essential for procurement managers with supply chains reaching into growing risk areas,” Glen concluded. By using Segura to trace orders online, companies can implement responsible sourcing practices and protect themselves.