Supply chain execs more worried about risks

Supply chain executives are growing increasingly concerned about the risks to their supply chains, according to a survey made public yesterday by Deloitte Consulting.

According to the firm's 2013 "Global Supply Chain Risk" survey, 53 percent of the 600 executives canvassed said that supply chain disruptions have become more costly over the last three years. Companies in the information technology, industrial products, and diversified manufacturing sectors were those most likely to confirm that sentiment, according to the findings.

About 53 percent of respondents said that "margin erosion" was the most costly by-product of a supply chain disruption. That was followed by "sudden demand change," cited by 40 percent of respondents. The latter problem reflected ongoing supply chain challenges with growing customer expectations, short product cycles, and emerging competitive challenges, Deloitte said.

About 45 percent said they lacked confidence in their current risk management systems, the survey found. The biggest challenge to developing a sound risk management program was the "lack of acceptable cross-functional collaboration," which was cited by 32 percent of respondents. The second most-cited challenge was "cost of implementing risk management strategies," noted by 26 percent, according to the survey.

About three-quarters of respondents said their supply chain risk management models are organized around functional silos, which results in a lack of visibility and collaboration, the firm said.

Survey organizers warned that operating without an effective risk management system poses a significant risk itself. "Supply chains are increasingly complex, and their interlinked, global nature makes them more vulnerable to a range of risks," said Kelly Marchese, a principal at Deloitte. "This increased complexity, coupled with greater frequency of disruptive events such as geopolitical events and natural disasters, presents a precarious situation for companies without a solid risk program in place."

Deloitte conducted its survey via telephone and online interviews from July to October 2012. The global consulting company contacted executives at manufacturing and retail companies that have a minimum annual revenue of $100 million. Thirty-six percent of the contacted companies were headquartered in North America, 28 percent in Europe, 11 percent in China, 11 percent in Japan, and 7 percent in Brazil.