Supply chain doubts grow

Even before the unrest in North Africa began to spread around the region, causing oil prices to spike among other economic effects, supply chain managers who took part in a survey on supply chain risk indicated they were uneasy at best about what the next year would hold.

More than 60 percent of the respondents to the survey conducted by the Tompkins Supply Chain Consortium said they had a higher degree of uncertainty about future risk than they did one or two years ago, while another quarter said they viewed risk much the same way as they had in the past. And the larger the company, the greater the level of doubt: 78 percent of those categorized by Tompkins as working for "mega-companies" said their level of uncertainty had risen.

"Overall, the data suggests that the larger the company, the more complexity, which creates more areas for uncertainty," wrote Bruce Tompkins and Chris Ferrell, the authors of the report, Uncertainty Is Certain.

The survey participants came from a cross section of industry, led by food and beverage, pharmaceutical and chemical, and transportation and distribution services companies. Nearly half said they had international responsibilities.

So what, exactly, are they uncertain about? Asked to rank the areas that they were most concerned about, the survey participants put planning at the top of the list, followed by sourcing, sales and customer service, transportation, and manufacturing.

"With the last two years being uniquely difficult and impossible to predict, it is not surprising that planning and sales are high on the list," concluded the authors. They added that the respondents' concerns about sourcing were also easy to understand given that "the economy has made supplier relationships very difficult to maintain and a significant number of companies have gone out of business."

Uncertainty about what the future holds for supply chains is apparently affecting businesses in ways that are all too concrete. When asked to evaluate the impact of uncertainty on their supply chain operations, the majority of respondents said it was adding cost, increasing inventories, lengthening lead times, and reducing speed to market.

"Not understanding the past and present, which reduces the ability to predict the future for supply chain practices, clearly adds steps and time to the process, as well as equating to higher costs," the authors wrote. "Inventory levels and lead times are increased to cover for the uncertainty of demand. Speed to market is impacted by increased inventory and the ability to make quick decisions about what products to put where in order to optimize efficiency and customer requirements."

The Tompkins Supply Chain Consortium is an arm of Tompkins Associates with 400-plus retail, manufacturing, and wholesale and distribution members who participate in a range of benchmarking and other supply chain studies.

Note: The report can be downloaded here (you have to register).