Supply Chain Reality: Much Risk Tied Up in Shrinking Pool of Suppliers
Today's companies have better supply chain apps than ever before -- but they also face bigger risks. Many large enterprises use the same, small pool of supplier companies, so the ripples from one recession-related sinkage can spread far and wide.
China, in particular, has lost much of its luster as the low-cost, no-frills manufacturer to the world. China "is the world capital of supply chain risk," notes Kevin O'Marah, AMR Research's chief strategist in a May report, titled "Supply Chain Risk, 2008-2009: As Bad as It Gets." Top risks include: intellectual property infringement, supplier quality failures and internal product quality failures.
That inherent Chinese risk becomes almost exponential, simply because so many companies have flocked to China for sourcing partners: And when the dominos fall, it's difficult to make them stop. O'Marah offhandedly wonders whether the world has put "too many eggs" in China's basket.
Of course, when the economy does rebound, companies may find that there aren't enough manufacturers to deal with their manufacturing demands.
O'Marah sums up today's unenviable supply chain environment this way: "Our newest quarterly risk survey data just came in, and the story shows a quantum leap in maturity among global supply chain professionals who have enjoyed the ultimate real-world crash course in risk assessment and mitigation," O'Marah writes. "The bottom line: Disaster is real and pervasive."
Do you Tweet? Follow me on Twitter @twailgum. Follow everything from CIO.com on Twitter @CIOonline.
