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9 August 2013

New report highlights importance of supply chain risk management

Content team

The importance of firms conducting thorough supply chain risk management processes has been highlighted by a new report.

It was noted in the 2013 Global Supply Chain and Risk Management Survey, conducted by the Massachusetts Institute of Technology (MIT) and PwC, that there are five key principles that companies need to bear in mind in order to better manage their supply chains and minimise their exposure to potential threats.

The study said these include recognising that supply chain disruptions can have a serious impact on an organisation's business and financial performance. Additionally, it was noted that firms with mature supply chain risk processes are more resilient to these issues, while those that commit to flexibility are in a better position than those that don't.

Other steps that businesses can take to improve their resilience include investing in risk segmentation and ensuring they examine all dimensions of financial and operational performance when conducting an assessment.

MIT professor David Simchi-Levi, founder of the MIT Forum for Supply Chain Innovation, stated that flexibility will be critical to a company's performance in the coming years, particularly as markets are set to remain uncertain.

He added: "A greater degree of flexibility in their businesses will allow companies to better respond to demand changes, labour strikes, technology changes, currency volatility, volatile energy and oil prices."

However, the study found that 60 per cent of respondents admitted to only paying marginal attention to risk reduction processes and often only mitigate risk by increasing capacity or strategically positioning additional inventory.

When asked how key supply chain complexity drivers have evolved over the past three years, 95 per cent of firms said dependencies between supply chain entities have increased. Meanwhile, 94 per cent agreed changes in the extended supply chain network configuration occur more frequently, while the same number said new product introduction has been more frequent.

Glen Goldbach, PwC's risk management director, added: "As companies expand into the global marketplace, they need to adjust their supply chain strategies to meet the increasingly complex requirements of their customers and manage multiple distribution channels."

Content team, Bureau van Dijk

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