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Brexit Concerns Loom Large, Despite Reduced Supply Chain Risk

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The Global Supply Chain Risk Report is a joint study by Cranfield School of Management and Dun & Bradstreet. The report investigates actual supply chain risks faced by European companies with international footprints.

Fears over Brexit increase due to businesses’ perception of supply risk

The Q2 2018 Global Supply Chain Risk Report, published by Cranfield School of Management and Dun & Bradstreet, finds that fears over Brexit appear to be increasing businesses’ perception of the risks in their supply chain, despite evidence suggesting many have taken steps to ready themselves for a post-Brexit environment.

Fears over Brexit appear to be increasing businesses’ perception of the risks in their supply chain.
 

Overall, the findings show that supplier criticality - the percentage of unique buyer-supplier relationships where the buyer categorises the supplier as critical or key, and one of four metrics covered in the report - increased 2% in Q2 2018, which is a 12% increase in the past three quarters.

 

It seems the continuing uncertainty surrounding Brexit is feeding buying companies’ perceptions of an increasing level of dependency on their suppliers, despite other risk metrics suggesting most are taking significant action to reduce their risk. As the March 2019 deadline approaches, uncertainty around the tariffs, barriers and trade agreements that will impact supply chain relationships appear to be at the forefront of businesses’ minds.

Key Industry Findings:

  • The infrastructure sector (comprising transportation, communications, electric, gas, and sanitary services) reduced supplier financial risk by 3%, global sourcing risk by 21.3% and foreign exchange risk by 22% during Q2 2018, but concern over reliance on key suppliers remained the same as at the end of Q1 2018.
  • In the construction sector, there was only a slight increase in global sourcing risk (1.1%), while supplier financial risk and foreign exchange risk remained almost the same. However, despite this, buying companies’ perception of dependence on suppliers increased by 2.4%.
  • In the manufacturing sector, although global sourcing risk and foreign exchange risk continued to increase in Q2 2018 (by 1.4% and 1.6% respectively), the rate of increase slowed dramatically, and supplier financial risk remained static at 23.3%. This could be as a result of concerted action to mitigate against perceived risks, a narrative supported by a 2% increase through Q2 in perceived reliance on critical suppliers.
  • The report highlights potential cause for concern in the retail sector. This sector has the highest financial risk at 24.1%, up 2% from Q1 2018 and 7% over the past three quarters - despite wider risk metrics remaining the same - suggesting increased risk of insolvency in the supplier base.

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 500,000 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 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.

Replay the webinar covering the background of the report, the key findings and practical implications for procurement professionals. Follow this link to watch.

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