RISING SUPPLY CHAIN RISK RAISES QUESTIONS ABOUT COMPETENCY

Supply chain risk is perennial. This is something that we in the profession have known for a long time; it is one of the things that makes the job of a procurement and supply chain manager so interesting. Risk is not static. It flexes and evolves, increasing and decreasing, demanding a range of skills to be able to respond appropriately and proportionately.

Over the final quarter of 2014, global supply chain risk was on the up and perilously near its all-time high, following a protracted period of risk decline. This was revealed in the CIPS Risk Index, produced in conjunction with D&B. The index is an indicator of the pressures weighing down supply chains globally, taking into account the socioeconomic and business continuity factors that contribute to supply chain risk across the world. In Q4 2014, the risk score rose in every region of the world, apart from Western and Central Europe. The climb in risk was fuelled by the significant reduction in oil prices over the past six months, which for some may seem counterintuitive. Surely, falling input prices should signal a fall in risk? To the untrained eye, yes perhaps. But for those of us who work within this profession, we understand that for every ebb and flow, there are potential upsides and downsides. Being able to spot both is crucial.

Where is risk coming from?

Cheaper commodity prices are a good thing for many, most particularly consumers. For businesses, they allow buyers to negotiate better rates from their suppliers. However, there is always the potential for suppliers to be tempted into delivering results with less care and compliance to best practice procedures as they try to maintain their own margins. This is a global phenomenon which has a different impact depending on where you are in the world. What, then, is driving increased risk in all parts of the world except Western & Central Europe?

Apr-Jun 2015 Issue

Chartered Institute of Procurement & Supply