The Chartered Institute of Procurement and Supply has warned of the risks of manufacturers relying on a handful of global suppliers, following one of the largest ever car recalls.
The recall has been triggered by a defect in airbags supplied by Takata Corporation which is estimated to affect 33.8 million cars around the world from ten manufacturers including Honda and Toyota.
CIPS director Duncan Brock said: “Another automotive recall once again highlights the perils of managing huge global supply chains ineffectively and without risk mitigation strategies in place. These are the high costs companies have to pay if there are supply chain failures. The main issue is that companies are increasingly relying on a handful of global suppliers for key components. This approach poses huge risks, as this recall clearly shows.
“At the companies involved, procurement teams chase round to trace all the affected products and address quality control. They will also be looking to rapidly replace stocks and, in the worst case scenario, look for new suppliers if they can’t resolve these issues quickly.
“Long and complex supply chains, short development cycles, and reliance on a handful of suppliers, mean that these kinds of issues are not going to disappear anytime soon.
“We very rarely seem to hear about shareholders and analysts interrogating companies about how robustly their supply chains are managed, yet this is one of the most important functions and biggest areas of risk a business has. This latest recall should at the very least start to prompt some searching questions and ask why quality is still in question – surely it is a fundamental requirement for any supplier to deliver to specification. Without doubt consumers will be asking themselves this.”