Managing Change: A Supply Risk Imperative

AMR Research recently published a brief that will be of particular interest to not only those individuals tasked with managing specific supply risks (e.g., bankruptcies, quality issues, etc) but to anyone in procurement tasked with operating in an uncertain environment. Which, you probably guessed it, is all of us. Noha Tohamy notes in this free excerpt from the full report that "global companies are struggling to understand and mitigate risks across their extended supply chains in arguably some of the worst economic conditions of modern times." But not only are times tough -- they're volatile as well. To wit, "when fuel and energy prices skyrocketed, many companies questioned much of their globalization assumptions: chasing low material and labor costs in countries like China with little concern about the cost of transporting raw materials, components, and ultimately finished costs to and from these countries." But guess what happens when oil drops below $60 (now $50, as I write) a barrel -- those original cost assumptions were accurate.

So what region, according to AMR's latest survey data, gives the most supply risk heartburn to organizations? It's not hard to figure out. If you guessed China, give yourself a counterfeit t-shirt (or your kids a lead painted toy) as a reward. According to AMR China is the "top contributing region for 9 of the 15 risks [that AMR Surveyed], including intellectual property infringement, supplier and internal product quality failure, and security breaches." But surprisingly, the US is also a major contributor to supply risk ajada thanks to "energy and commodity price increases and volatility, and lower consumer spending." So whether you're focusing sourcing efforts in the East or the West, two things are for sure: managing change and the risk that results from it.

- Jason Busch

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