What is in this article?:
Have supply chain managers made things worse by concentrating on fewer suppliers to reduce costs? Do government security efforts under- or over-react to the issues? Have they reduced flexibility to a point where global supply chain participants are less able to respond to disruptions?
With supply chains growing longer and more complex, the likelihood of supply chain disruption increases dramatically. Companies have new exposures in new geographic regions, and the interconnected nature of the global economy makes problems more and not less likely to arise.
In a report developed in concert with the World Economic Forum, “Building Resilience in Supply Chains,” we looked at some of the natural disasters and emerging threats that dominated headlines in 2012 and have continued to perplex managers into 2013. Just in the last 12 months, we have seen armed conflict and political upheaval in the Middle East affecting oil shipments; the closure of ports and airports in the northeastern United States due to Hurricane Sandy; and severe, prolonged drought in the U.S., leading to crop failures and the lowest levels for the Mississippi River in nearly two decades.
There are other factors at play as well. Supply chains are increasingly dependent upon the flow of information, so the rise of cyber crime poses significant threats to supply chain continuity. Concern is also growing about systematic attacks on financial institutions that could, in some circumstances, lead to an inability to make and receive payments.
Companies are finding it harder to get insurance coverage and are paying higher premiums, while financial reforms are putting pressure on banks to tighten the terms of trade finance.
These events and others have forced political and business leaders to pay attention to supply chain risk. This new focus requires an updated framework for evaluating and responding to risks. It also raises some questions: Have supply chain managers made things worse by concentrating on fewer suppliers to reduce costs? Do government security efforts under- or over-react to the issues? Have they reduced flexibility to a point where global supply chain participants are less able to respond to disruptions?