Spend Matters UK/Europe Musings on the EU Bailout and Supply Chain Risk

Across the pond, my colleague Peter Smith penned a thought provoking post last week exploring how, in his view, an EU bailout would do little to help contain supply risk in the PIGS countries. Knowing Peter, his personal definition of supply chain risk planning here is probably weighing the cost of booking travel to a favorite destination in Europe against the risk that a the Michelin-starred restaurant he was planning on visiting -- which would be cheaper than in recent memory, given the slide of the Euro -- on the trip going bust right as he planned to show up like other suppliers in the same market. Alas, whether your supplier is a purveyor of haute cuisine or more on the castings or forgings side, the same fate might awake those operating in the at-risk regions. Here, Peter asks some great questions we should ask regardless of whether the banks have to write off their debt or take fifty cents on the dollar for it.

These questions include:

  • Does the bailout do anything to get Greece out of its death spiral of a shrinking economy, lower tax revenues, increasing deficit, leading to lower public spending leading to a shrinking economy, lower tax revenues... etc?
  • Can a country maintain civil order when half its young people are without jobs (unemployment is at almost 50% now in Greece AND Spain for the under 25s)?
  • Will the population of an ancient and proud European country accept defeat and (economic) occupation by another European power?
  • If you were a business in Greece, or an individual with flexible assets, would you invest in the country, pay all your taxes promptly and willingly? Or would you look to move as much as possible beyond the reach of what you might perceive as a foreign occupying power?

Peter is spot-on when it comes to a reality check around working with suppliers in Greece and other markets. Right now, organizations with both tier one and multi-tier supply chain exposure in Greece, Spain, Portugal and even Italy would be well advised to develop supply chain risk mitigation strategies and alternatives -- successful EU bailout or not. Or, said a similar way, as Peter puts it: "Keep your supply chain risk management index high for supply to -- or from -- Greece we would suggest, and southern Europe more generally is no better off or stable really than it was a week ago."

Jason Busch

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