Supply Chain: Companies Less Dependent, But Overall Risks Vary

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The Global Supply Chain Risk Report is a joint study by Cranfield School of Management and Dun & Bradstreet

Managing supply chain risk is an ongoing challenge for European companies with global tentacles. So many factors can have an impact, from Foreign Exchange rates to natural disasters to tariffs and sanctions. However, in our latest study, no single sector appears to have a particularly risky profile according to the Global Supply Chain Risk Report - Q3 2018, a joint study by Cranfield School of Management and Dun & Bradstreet. The report examines supply chain data in five industry sectors -- Finance, Infrastructure, Manufacturing, Services, and Wholesale – to ascertain companies’ level of exposure in four main areas of risk exposure. Among our findings, companies in this study are not as dependent on suppliers, viewing them as less critical or key to operations.

Companies were not as dependent on suppliers in the third quarter, viewing them as less critical or key to operations.

Supplier Criticality, which is the percentage of buyer-supplier relationships where the buyer categorises the supplier as critical or key, stands at 33.9% in the third quarter, compared with 37.2% at the end of Q2 (June 2018), representing a 9% reduction. In the last three quarters, Supplier Criticality decreased 20% overall, which shows buying companies’ perceptions of dependency on suppliers has dropped. The trend suggests an increase in competition in the supplier market, and it is primarily driven by perceptions in the Finance, Services, and Wholesale sectors.


Sectoral Analysis on Supplier Criticality

Financial risk also declines

Supplier Financial Risk – the percentage of buyer–supplier relationships where the supplier has a high or very high financial risk score according to Dun & Bradstreet ratings – has also declined slightly.

The overall score decreased 2% to 22.4%, compared with Q2. Financial Risk reductions in the Manufacturing and Wholesale Trade sectors drove the decrease. In the meantime, the risk appetite of the Finance sector is increasing and is highest among all five sectors. It may be attributed to more sophistication on the part of buying companies in the Finance sector, which tend to have sophisticated credit analytics and are able to manage Finance Risk more effectively.

The report reveals that no sector appears to have a particularly risky profile, although there are clear differences in the risks they face. That means the strategies required for managing that risk need to be different too. Our analysis provides an industry-specific benchmark, which can help managers identify the critical risk in their sectors and compare their own performance against industry norms. Using the latest data and analytics to manage the supply chain and protect reputation is wise. Information on supply chain relationships can help businesses find potential areas of exposure and manage them.

About the Global Risk Report

Experts from Cranfield’s Centre for Logistics and Supply Chain Management have analysed risk data supplied by Dun & Bradstreet, drawing conclusions from anonymous transactions between European buyers and their suppliers located in more than 150 countries worldwide. Dun & Bradstreet data for Q3 2018 includes 121,367 buyer–supplier relationships.

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 industry sectors studied in Q3 are Finance, Infrastructure, Manufacturing, Services, and Wholesale.

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

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

Check out our upcoming webinar to learn much more about the key findings and practical implications for procurement professionals.

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