A recent Chainlink survey revealed that 45% of companies devote less than $50,000 each year to “assessing and auditing supplier and supply chain risk," which went right along with the 2011 Arena Solutions Manufacturing Outsourcing Strategies & Trends Survey, which revealed that there are major gaps when it comes to managing supply chain risk.
Although world events suggest that it is a perfect time to shore up your supply chain, there are many reasons why implementing change in this area is easier said than done.
For one thing, crisis hits so randomly, it's hard to know the best way to prepare. Is it enough to diversify across countries or do you need to diversify across continents? Should you have multiple sources for components, or focus on bringing core competencies in-house? It's hard to know, and with the initial investment required, doing nothing seems like a much safer choice.
Another reason manufacturers neglect supply chain risk management is the constant pressure to cut costs. Manufacturers who lean-up the supply chain by cutting spare inventory or “extra” talent, moving non-core services to lower cost providers or reducing suppliers are inviting extra risk, but improving their immediate numbers - making it a tough line to walk.
Finally, even if manufacturers want to invest in shoring up their supply chains, many organizations have delegated supply chain risk management so far down the chain that the authority tasked with the job lacks any budget to invest in it. For about 80% of companies, according to the Chainlink survey, supply chain resilience is only a priority at the executive level if the executive is directly responsible for supply chain functions. Although C-level executives get involved after a crisis—when, as one survey respondent put it, it’s “all hands on deck”—in normal circumstances supply chain risk management is handled by lower-level managers.
To read the original full article on this topic, or more about supply chain risk management, visit the Arena Solutions blog.
Unfortunately, when faced with improving short term ROI versus investing in supply chain security, manufacturers who are being asked to do-more-with-less may very well decide to cut costs and hope for the best. Do you think this is a wise strategy? Do manufacturers have a choice to do otherwise? And are there other reasons why investing in supply chain risk management might not be a top priority?