Vendor failure biggest supply chain risk

State of Flux

Financial failure of suppliers poses the greatest risk to global supply chains, according to a report by risk adviser Aon and consultancy State of Flux.

The survey of more than 100 risk and supply chain managers from global organisations found that firms are taking supply chain risk more seriously in light of the economic climate, with 30 per cent citing the downturn as a key factor in prioritising risk management.

Although 75 per cent of businesses feel vulnerable to the financial failure of suppliers, only 7 per cent said they had suffered disruption as a result of financial conditions in their supply chain.

The risk of a pandemic affecting the supply chain was a growing concern for 19 per cent of respondents. Data security threats were cited by 29 per cent.

Despite risk management moving up the corporate agenda, more needs to be done, said Finlay Murray, executive consultant at State of Flux.

"Supply chain risk management is relatively immature with only 15 per cent of respondents reporting a complete understanding of their suppliers' supply chains and where they impact their operations," he told supplymanagement.com.

He suggested, however, that it is "unrealistic" to expect organisations to directly manage risks throughout the supply chain. Rather, buyers should work with tier one vendors to ensure they are managing risk.