Friday 22nd Sep 2017 - Logistics & Supply Chain

How risk-averse are you?

The rise of economic nationalism has driven global supply chain risk to a 24-year peak, according to the CIPS Risk Index, powered by Dun & Bradstreet.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

The index rose to 82.64 at the end of 2016 – up from 79.14 at the end of 2015.

The upward trend in supply chain risk is clearest in Western Europe, where contribution to global risk rose to 30.681 in the fourth quarter from 30.048 in the first quarter.

The study highlights the impact of sluggish growth across developed and emerging market economies in the second quarter, and the UK’s vote to leave the EU at the end of June.

“Supply chains in the UK were severely hit by a depressed pound which followed the Brexit vote in June. This pushed up the cost of imports, leading to some early conflicts in the third quarter between retailers and their suppliers over who should shoulder these costs. The increasing likelihood of a ‘hard’ Brexit, and the UK’s departure from the single market, will add further disruption to supply chains throughout Europe.”

The study also points out that there has been a wider revival of interest in trade restrictive measures across Europe. Elections across Europe in 2017 are expected to see gains for parties in France, Italy, the Netherlands and Germany that put Euro-scepticism and restrictive trade measures at the centre of their policies.

And of course, in the US, the election of Donald Trump has seen a shift towards protectionism in global trade policy.

Responding to this trend is clearly going to be a challenge for supply chain professionals. John Glen, CIPS Economist and director of Cranfield’s Centre for Customised Executive Development, highlights the importance of developing closer relationships with suppliers to ensure that it is possible to respond quickly to change.

But, to what extent should any organisation consider major structural change to its supply chain to deal with these developments? Is it time to look at onshoring, for example, even if it means moving to a sub-optimal structure?

There are no easy answers, but supply chain professionals need to be asking the hard questions now to ensure they are prepared for the uncertainty that lies ahead.

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