Manufacturing execs increasingly wary of supply chain risks and negative effects

The key to maintaining a successful supply chain is emphasizing efficiency. The smoother the supply chain runs, the better it is for all parties involved. However, the converse of that scenario is becoming increasingly more common as companies are encountering supply chain disruptions in higher frequency than previously seen. Such snags are also causing major problems for manufacturers, a recent survey found. In order to bring suppliers in line and minimize risk, firms may want to work with supply chain recruiters to find risk management talent.

Nearly half aren't prepared for risks
A recent survey by global accounting firm Deloitte exposed a sense of wariness common among manufacturing upper management. Of the 600 executives surveyed in "The Ripple Effect: How manufacturing and retail executives view the growing challenge of supply chain risk," 45 percent said their supply chain risk management programs and practices were either somewhat effective, or not effective at all. The lack of preparation betrays the common thought among C-suite level managers who believe effective risk management is crucial: 71 percent said supply chain risks heavily factored into strategic decision-making.

Worse news for manufacturing execs is the fact more executives (53 percent) said such occurrences have become costlier over the last three years.

Chief among the most costly disruptions was margin erosion. Thirty-two percent of respondents ranked it the No.1 most costly outcome of supply chain risks, with 22 percent ranking it second. Overall, 40 percent identified sudden demand change as a negative product of disruptions; 36 percent incurred costs from physical product flow disruption; 32 percent cited product quality failure; 21 percent said risks created costly regulatory noncompliance and employee safety failure; and 17 percent placed blame on social responsibility failure.

"Supply chains are increasingly complex and their interlinked, global nature makes them vulnerable to a range of risks," said Kelly Marchese, principal, Deloitte Consulting LLP. "This increased complexity, coupled with a greater frequency of disruptive events such as geopolitical events and natural disasters, presents a precarious situation for companies without solid risk management programs in place."

The report also noted companies were lacking effective capabilities that strengthen risk management strategies. According to Deloitte, Four qualities of a stable program most were lacking among respondents were visibility, flexibility, collaborations and control.

Manufacturing businesses with insufficient risk management strategies can gain a fresh perspective on the issue by working with supply chain recruiters to find qualified talent.