Most companies lag in supply chain risk management

New report finds 58 percent of companies suffered financial losses as a result of supply chain disruptions over the past year

For companies trying to grow their global operations, supply chain demands and risks make it an uphill battle. The majority of organizations are fumbling along the way, according to a new report from research firm Aberdeen Group.

Boston-based Aberdeen surveyed 138 companies about their supply chain risk management practices and priorities and found that over the past year 58 percent of companies suffered financial losses as a result of supply chain disruptions. And despite their concern about the security and smooth operation of their supply chains, many companies are still at the early stages of thinking about supply chain risk management.

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"Companies are just now catching onto fully understanding the tradeoff of having a global business," said Viktoriya Sadlovska, a research analyst in the Global Trade Management/ Supply Chain Finance group at Aberdeen. "Because of changes over the last few years, like product quality issues and customer demands, there needs to be an understanding that companies need to be much more proactive in managing all risks if they want to keep reaping the benefits of being a global company."

More than a third of companies polled reported unexpected customer demands and shipment demands in the last year. Other supply chain disruptions commonly seen were supplier capacity that did not meet demand, and delayed, damaged, or misdirected shipments.

"Companies need to be managing business planning and continuously monitoring the risk of customers demand changes," said Sadlovska. "They need to adapt their own manufacturing processes for the need that is out there. They have to be in touch with the market and make sure their business is going in direction demands are taking it."

Most of the businesses surveyed still have a long way to go in figuring out solutions for potential problems, according to the report. The study investigated current activities across various supply chain risks and revealed that less than one-third of companies are actively managing each individual risk. Areas included import and export compliance risks, raw material shortages and price risks, demand fluctuations, product quality associated risks, financial risk (e.g. critical shortage of working capital to support operations), risk profile of suppliers and customers, currency volatility, non-environmental catastrophic events (damaged equipment, fire, infrastructure collapse), logistics capacity and congestion, supply chain security, and environmental disasters.

"It was striking to me that in each of those categories less than a third of companies actively said they were managing those risks," said Sadlovska.

While many of the findings highlight business risk for companies, Sadlovska said security risks are a major issue on the minds of corporations as well.

"From a CSO point of view, cargo security is one part of risk. Then you also have trade compliance risks on the border side. Companies really have to make sure, for instance if they are in a sensitive technology space, they aren't exporting certain technologies. Or if they are importing, they have to make sure not importing from restricted, embargoed countries," she said. "It's hard for trade compliance professionals to make a case in this instance because it's hard to make a case on avoidance of potential penalties."

CSO is an InfoWorld affiliate.

This story, "Most companies lag in supply chain risk management" was originally published by CSO.

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