Supply chain risk – FT highlights supply chain lack of insight and potential crisis

We welcome this guest post by Chris Gayner, Marketing Manager, Proxima, responding to an article in the Financial Times.

The Financial Times recently published this article (behind the paywall), summarising the results of a recently concluded research study that portended a supply chain crisis in the UK driven by corporate procurement teams’ lack of insight and visibility into their supplier network.

Many of the supply chain professionals questioned admitted to having little to no knowledge of the deeper levels of the supply chain, leaving their companies exposed to the possibility of sourcing supply and service from companies that may be employing slave or child labour or engaging in any number of malfeasant business practices.

The study, commissioned by the Chartered Institute of Purchasing and Supply, and the coverage of the results, tell us a number of important things:

  • First, it reaffirms the relevance of the findings of our comprehensive Corporate Virtualization study from one year ago, which demonstrated the extent to which global corporations have directed more and more spend, as a percentage of revenue, outside the organisation, relying on a diverse and disparate network of global suppliers and suppliers to those suppliers. Within this reality, it underscores the importance of engaging suppliers and establishing ongoing monitoring programmes that can potentially avert supplier-driven disasters, like those referenced in the FT article.
  • Second, it illuminates once again that the opportunity for procurement to embrace a more strategic role within the corporation is there for the taking. For too long, procurement teams have operated on an island too concerned with stepping over pounds to save pennies. It’s no longer enough to just procure the needed supply and service – procurement teams need to take the lead in supplier engagement for extracting maximum value from the network while at the same time protecting and preserving the corporation’s reputation and brand. The need for procurement to have a more engaged role in dealing and managing the supply chain has never been greater.
  • Finally, the fact that the results of this study attracted the attention of a global financial media outlet as renowned as the Financial Times says something about the growing importance of the issue.  It also brings to the fore the function of procurement within an organisation and its potential to impact revenue growth and shareholder value. This is certainly a positive development and we continue in our efforts to help corporations understand the connection between good supplier management, corporate reputation and overall performance.

A number of blue-chip companies around the world have already been stung by their ignorance of the make-up of their supplier network. The findings of this study should once again sound the alarm so the next crisis may be averted.

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