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Q4 2018 Global Supply Chain Risk Report

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Top supply chain risks for European companies by industry

The “Global Supply Chain Risk Report” is a joint study by Cranfield School of Management and Dun & Bradstreet. The report investigates actual supply chain risks faced by European companies with international footprints.

The Q4 2018 report finds that companies are increasingly cautious over taking risks in their supply chains, with fears about their level of dependence on suppliers and sourcing from high-risk countries dominating their thinking.

Construction industry’s top supply chain risks and opportunities

The construction sector had a significant increase of 40% in Supplier Criticality. Now, more than 80% of the 11,000 relationships reported within this sector are classified as critical or key, showing a marked increase in the perception of dependence on suppliers. On the other hand, Financial Risk for this sector has a declining trend, now just under 20%. Global Sourcing Risk was already exceptionally low, and then it decreased further to 0.1%. Finally, the very low Foreign Exchange Risk has increased to 1.6%. This sector is marked by the majority of the suppliers being located in Europe and transactions being carried out in the same operating currency of both the buyer and the supplier.

Current risks and opportunities in manufacturing industry

The manufacturing sector had a stable year in terms of all metrics except Global Sourcing Risk, which decreased in the last quarter by 25%, indicating a marked reduction in buying companies sourcing from suppliers in high-risk countries. However, it is still at the highest level of the seven sectors reported, with 11% of the relationships being with suppliers located in high-risk countries. The Supplier Criticality metric for the manufacturing sector was around 36% – the second lowest for the sectors reported, indicating that the perception of dependence on suppliers is relatively low. Financial Risk was around 22%, and Foreign Exchange Risk was around 42%, the second highest out of the sectors reported.

Infrastructure sees increase in supply chain risk

The infrastructure sector – comprising companies in transportation, communications, electric, gas, and sanitary services – has experienced an overall increase in risk, with three out of four risk metrics showing an increase through Q4 2018. There was a dramatic 83% increase in Supplier Criticality to around 80%. Further, Financial Risk increased (by 9%) to 19% and Foreign Exchange Risk also increased, reaching 14%. At the same time, the already very low Global Sourcing Risk stayed at a stable 0.2%.

Reduced overall risk in wholesale industry

The wholesale sector, on the other hand, has seen an overall reduction in risk, with a slight decrease of 2% in Supplier Criticality to around 52%. Financial Risk for this sector was stable at 15%. Global Sourcing Risk decreased to 6%, and Foreign Exchange Risk was stable at around 45%.

Retail supply chain risk assessment

The retail sector has also experienced an overall reduction in risk, with two out of the four metrics showing a decrease. But Supplier Criticality remains the highest out of the seven sectors reported, stable at 89%, showing a sustained perception of high dependence on suppliers. At the same time, Financial Risk decreased slightly to 20% and Global Sourcing Risk decreased more markedly (by 11%) to 9%, whereas Foreign Exchange Risk was stable at 19%.

Reduced overall risk in financial services

The finance sector is another that’s experienced an overall reduction in risk, with Supplier Criticality reducing to 47% and Financial Risk reducing to 23% – although Financial Risk in this sector remains the highest out of the sectors reported. Global Sourcing Risk has experienced a significantly decreasing trend over the last three quarters, from 14% to 10%, indicating a reduction in sourcing from suppliers in high-risk countries. Foreign Exchange Risk was stable at around 35%.

Supply chain risks in services sector mostly stable

In the services sector, Supplier Criticality was stable at around 23% and Financial Risk was stable at around 16%. Global Sourcing Risk on the other hand has increased slightly to 2% – although this is still one of the lowest out of the seven sectors – and this was accompanied by a small increase in Foreign Exchange Risk, to 12%.

About the report

Experts from Cranfield’s Centre for Logistics and Supply Chain Management have analysed data supplied by Dun & Bradstreet, drawing conclusions from around 200,000 anonymous transactions between European buyers and their suppliers located in more than 150 countries worldwide.

The report looks at four key risk metrics (Supplier Criticality, Supplier Financial Risk, Global Sourcing Risk and Foreign Exchange Risk) to assess supply chain risk and provide businesses with a view of trends within their industry sector and across the wider economy. The focus industry sectors are construction, manufacturing, retail, infrastructure, wholesale, finance and services.

By analysing trends by sector, the report highlights areas for monitoring and consideration in supplier management decisions.

The full “Global Supply Chain Risk Report” is available to download from the link below.

 

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