Understanding Risk to Improve Resilience in the Global Supply Chain

global-supply-chain-250x324October 2014

Advisen wrote a white paper that discusses how supply chain risk management is increasingly being acknowledged as a core contributor to corporate performance and profitability. The free, 10-page paper is sponsored by FM Global.

Summary

The Tohoku earthquake and tsunami, the 2011 floods in Thailand, Icelandic ash clouds, and Superstorm Sandy and the tragic Rana Plaza factory fire in Bangladesh highlighted vulnerabilities in global supply chains.

With supply chains often extending across the globe, supply chain resilience is now recognized by many corporate decision-makers as a priority. A growing number of executives also understand that supply chain risk management is not only a necessary defensive measure, but also can be a source of sustained competitive advantage.

Analyses of recent large catastrophes reveal a number of common triggers of global supply chain disruptions, which has led to a growing consensus on supply chain risk management best practices. Additionally, significant new analysis on country-specific supply chain vulnerabilities provides support to decision-makers in choosing suppliers, planning international expansion and identifying vulnerable customers.

Global supply chains are now the norm in most industries. Advanced information technology and a robust transportation infrastructure enable companies to select suppliers offering the best quality at the lowest price wherever in the world they may be located. Global supply chains, however, often have more points of vulnerability, and it can be more difficult to manage safety, on-time delivery, flexibility, responsiveness, and sustainability. Major disruptions can cascade across entire industries, and can even have a measurable impact on the world economy. The 2010 Icelandic volcano eruption, for example, resulted in cancellation of 48 percent of European air traffic over eight days, with an impact that stretched as far as Kenya, whose economy lost an estimated $3.8 million per day.