Are SMEs the Weakest Supply Chain Risk Link?

risk management

Late last month, I took the same side as Stephen Allott, crown representative for small- and medium-sized enterprises (SMEs) at the UK Cabinet Office, in a pub debate in London, in which we argued for the motion that procurement is doomed for a variety of reasons, including the failure of many procurement organizations to effectively manage supply risk (see posts here, here, here, here and here). Then, coincidentally, on the flight back to the US, I read an article in a UK publication reporting that a majority of SMEs are not prepared to manage supply chain risk.

A curious coincidence? I’m not so sure.

Here are some of the highlights from the piece, which will likely catch most procurement organizations managing risk on only the tier-1 level off guard:

  • “Two-thirds of small companies unprepared for supply chain failure.”
  • Specifically, “66% of UK supply chain professionals either do not have or are unaware of a risk mitigation strategy which covers all the tiers of their supply chain.”
  • “A majority of SMEs lack a risk mitigation strategy in the event of a logistics crisis.”
  • “Only 11% of UK businesses currently have a close relationship with suppliers at all stages of their supply chain.”
  • “UK businesses with close supplier relationships are 1.5 times more likely to have avoided major supply chain crisis in the past 12 months and four times more likely to have complete visibility of their supply chain.”

When lower-tier suppliers fail to manage their own supply risk programs effectively, larger firms by default fail to do so as well. This is further proof – at least going back to the argument that Stephen and I made together – that procurement as in its current form is doomed unless something radical changes quickly.

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