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Mitigating global supply risk in twenty-twelve

During a recent workshop I delivered for several senior financial executives, we discussed some of the emerging global trends which are increasing Supply Chain risk. The risks of greatest concern were those which exist across a global supply base, as they are often the most difficult to identify define.

Shawn Casemore
Shawn Casemore
Here are three of the issues we discussed:

1. Rising labor costs
The cost of labor in China continues to increase, forcing many organizations to consider alternate offshore sources. Fortunately labor rates in those areas further from shore continue to remain low, ideal for labor intensive production. Opportunities exist in areas such as Bangladesh, Indonesia and Vietnam, however transportation to port remains a challenge.

2. Supplier insolvency
The recession of 2009 and 2010 resulted in many organizations dis-solving virtually overnight. Despite stabilization of the economy in North America, this risk still exists and necessitates an alternate strategy to confirm critical supplier stability. Integrating financial analysis as part of supplier qualifications for both new and existing suppliers is a strategy which can identify this potential risk in advance of issues arising, allowing for collaborative solutions and reduced risk.

3. Preparing for the unpredictable
We have all witnessed the dramatic effects of hurricanes and earth quakes across the globe, however we give little consideration to the potential impact these events can have on the Supply Chain. As an example, Fukushima resulted in component shortages for many auto manufacturers, directly impacting revenue despite the existence of strong sales. Although some risks are unpredictable, understanding the climate of critical suppliers and identifying alternate sources in differing regions is a means by which to reduce this supply risk.

Risk is often commensurate with complexity. Developing a sound Supply Chain strategy is the key to reducing risk and ensuring long term organizational stability.

Shawn Casemore, President, Casemore and Co.

Mitigating global supply risk in twenty-twelve

Vendredi 27 Janvier 2012

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