Companies Are Managing Risk for Less Than 20% of Suppliers

Jan. 14, 2010
New survey says supplier financial viability is the biggest concern of manufacturing execs.

While global corporations are focusing on creating collaborative partnerships with suppliers to make supply chains more efficient, a new study conducted by Arava, indicates that their top concerns include ongoing supplier financial viability, ensuring regulatory compliance and managing suppliers in emerging markets.

A significant number of those polled (71.4%) expressed that their biggest concern continues to be risk of supplier financial viability. However, despite these concerns, more than half of the financial, procurement and risk executives polled have less than 20% of their supplier base under active risk management.

Companies are also exploring opportunities to maximize budgets by adding more emerging market suppliers. For instance, the report found that 31.2% of those polled are "heavily penetrated in emerging markets" while another 31.2% have "already sourced some suppliers in emerging markets and are looking to expand low-cost country suppliers in 2010."

Not surprisingly, the top concern around suppliers in emerging markets is regulatory compliance (41.7%), followed by the financial viability of these suppliers (33.3%). Only 25% of those polled were concerned about product quality.

Based on our poll results we see a call to action for global corporations to implement more robust risk management processes to reduce the possibility of supplier failures and supply disruptions, improve supplier performance management, and enhance supplier compliance initiatives," said Tim Albinson,CEO of Arava, a provider of SaaS Supplier Information Management."More than half the companies we surveyed are managing 20% or fewer of their suppliers for risk, which is an alarming statistic. As we saw in 2008 and 2009, supplier failures can lead to broader business failures, so this is a critical area for business leaders to get right."

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