Q3 2019 Global Supply Chain Risk Report

The quarterly “Global Supply Chain Risk Report” investigates the level of perceived supply chain risk faced by European companies with international supplier relationships. Using four key metrics – supplier criticality, supplier financial risk, global sourcing risk, and foreign exchange risk – it assesses overall supply chain risk and provides businesses with a view of trends within their industry sector and the wider economy. By analysing trends by sector, the report highlights areas for monitoring and consideration in procurement decisions.

The third quarter of 2019 was a period of change for all four metrics investigated at the macro level (Supplier Criticality, Supplier Financial Risk, Global Sourcing Risk, and Foreign Exchange Risk), with Supplier Criticality and Global Sourcing Risk showing increases of 2% and 4.8% respectively.

Top supply chain risks for European companies by industry – Q3 2019

Of the economic sectors analysed, manufacturing and retail showed amplified risk, while most of the other sectors (construction, infrastructure, wholesale, finance, and services) enjoyed relatively stable risk levels. Lack of clarity over possible trade tariffs and other non-tariff barriers is leading to companies seeking out alternative countries to source from.

Manufacturing risk increases across the board

Manufacturing experienced significant increases across all four risk areas analysed in the report – Supplier Criticality was up 6.7%, Financial Risk up 2.1%, Global Sourcing Risk up 10.6% and Foreign Exchange Risk up 4.6%. This shows more companies are sourcing from high risk countries, whilst being more dependent on suppliers – and these are likely to exhibit higher financial risk and a greater probability of going insolvent.

Retailers and infrastructure must pay close attention to supplier criticality

The retail sector has seen increases in Supplier Criticality and Global Sourcing Risk of 5.4% and 2.7% respectively. The former has exacerbated the already high level of Supplier Criticality in retail, which remains the highest of all seven sectors at 89%, showing a sustained perception of high dependence on suppliers. At the same time, the increase in Global Sourcing Risk indicates an increase in sourcing from high-risk countries, which are often low-cost economies and therefore attractive to retail in its drive to reduce purchasing costs.

The infrastructure sector – which comprises companies in transportation, communications, electricity, gas, and sanitary services – saw Q3 increases in Supplier Criticality of 6.7%. Infrastructure continues to have the third-highest Supplier Criticality score of the seven sectors, at 76%. Foreign Exchange Risk continued its increasing trend, rising 6.7% during the last quarter and 35.1% over the last three quarters. This rise may be because buying companies in this sector are increasingly sourcing from other countries or are wishing to pay suppliers in the buyer’s own currency (possibly to exploit currency exchange fluctuations such as the GBP/EUR exchange rate).

A positive change for wholesale and services

The wholesale sector is showing a significant 7.4% reduction in Financial Risk during the last quarter, while other risk metrics have remained quite stable. This indicates that suppliers are becoming more financial stable, possibly due to a more cautious approach to procurement.

The services sector has enjoyed a reduction in all four risk metrics during the third quarter: a marked reduction of 11.6% in Global Sourcing Risk and between 3% and 4% in the other metrics. This suggests a more cautious approach to purchasing and, in particular, a reduced tendency to source from suppliers in high-risk countries.

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 181,000 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 third-party risk management decisions.

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

Download the report