Some of the greatest concerns for U.S. technology companies are interruptions and impediments to supply chain operations. That’s one of the findings of an annual report issued by BDO USA, which I saw reported on Businesswire last week.
The 2012 BDO Risk Factor Report for Technology Businesses, which analyzes the most recent SEC 10-K filings for the 100 largest publicly traded technology companies in the U.S., reports that 88 percent of tech companies cite concerns over reliable suppliers, vendors, distribution of products and services, as well as the global distribution chain. Interestingly, this marks the third consecutive year that supply chain concerns have increased (rising to 75 percent in 2010 and 86 percent in 2011).
The report also notes that natural disasters and other geopolitical issues pose a serious threat to supply chain management and operations. Indeed, 88 percent of companies cited those risks in this year’s study, up from 81 percent in 2011.
As automakers’ annual reports show, as well as news from Toshiba and Panasonic, the 2011 Japan earthquake, floods in Southeast Asia, and other natural disasters had a devastating impact. In fact, a rise in supply chain and business interruption risks was expected after the fallout from those events, says Aftab Jamil, partner and national leader of the Technology & Life Sciences practice at BDO USA, LLP. The effects of these incidents extended deeply into the technology industry and serve as a reminder of the fragility of even the soundest supply chain. As tech companies continue to grow and extend their footprint globally, supporting and securing operations is paramount for success, Jamil says.
I was also interested to see that rising product delays and raw material costs are growing concerns, which only makes sense given tech companies’ efforts to ensure timely development of products and services. So, for instance, equipment delays, manufacturing issues, and product liability were cited as risks by 80 percent of tech companies. Concerns about the price and availability of raw materials rose 21 percent in this year’s analysis (rising to 41 percent, up from 34 percent in 2011), which really is another result of Japan’s earthquake and tsunami.
These findings don’t really come as a surprise. Earlier this year, PRWeb reported on similar findings from another study. That study, released by eyefortransport (EFT) last February, found that 30 percent of hi-tech and electronics company supply chain executives believe their contingency planning could be better.
The results are the findings of the eyefortransport 2012 Hi-Tech & Electronics Supply Chain Industry Survey (conducted in late 2011), which was published in the 2012 Hi Tech & Electronics Supply Chain State of the Industry Report. But they do indicate that the effects of the past year’s crises and disasters had a clear impact on executives in the hi-tech industry. Consider this: in 2010, 65 percent of the respondents described their supply chain contingency planning as “average”, “below average” or “poor.” However, in 2011, the percentage of respondents describing their contingency planning in those terms grew to 80 percent.
This result correlates directly with industry interviews conducted in association with the survey, the firm reports. In those interviews, executives particularly noted the importance of supply chain agility as a response to supply chain interruptions, and a focus by companies on matters beyond profit margins.
So it’s clear that with these concerns in mind, executives at tech companies, as well as automotive and other industries, realize the impact of effects on the supply chain and the need to improve risk management, and, specifically, contingency planning. I look forward to seeing how they will go about making those changes, and what they entail.