Supply chain vulnerabilities posing safety risks to businesses: survey

A survey has revealed gaps in supply chain knowledge with some Australian businesses being unable to fully account for where their products and services have come from and go to, according to the Chartered Institute of Procurement & Supply (CIPS).

The survey of 645 supply chain managers worldwide shows that 57% of respondent companies from Australia* admit to having zero visibility beyond the second tier of their supply chain, with only a quarter having visibility of their entire supply chain.

Supply chains are becoming longer and more complex with four out of five Australian businesses surveyed stating they currently outsource from emerging markets in Asia. But, less than one in 10 of Australian procurement managers have a close relationship with suppliers beyond tier two of their business’s supply chain.

According to David Noble, Group CEO at CIPS, emerging risks associated with poor practices and standards in these markets are hard to manage.

“By increasingly turning to emerging Asian suppliers to maintain their price competitiveness, businesses are also becoming more exposed to risk,” said Noble.

“Having visibility and good supplier relationships at the first tier of the supply chain is clearly no longer enough as these risks do not always exist in the first tier, but often further down supply chains.”

One in five supply chain managers surveyed in Australia admit to having lost out financially in the past 12 months as a result of poor supplier relationships.

Noble said the opaque nature of Australia’s supply chains means that businesses are increasingly and dangerously exposed with the research showing that 70% of businesses are unable to guarantee there is no malpractice (such as child labour, slavery, fraud or corruption) in their supply chains.

“Supply chain issues such as poor health and safety standards for workers, labour abuse, and environmental degradation are endangering both consumers and the economy,” said Noble.

“Despite that there has been so little action in this area from Australian businesses.”

Over half (54%) of Australian businesses surveyed admit they do not have a risk mitigation strategy in place all the way down their supply chain should a crisis occur.

“Only by investing in a better understanding of the principles of good supply chain management and also forging closer relationships with suppliers across the entire network can Australian businesses ensure their supply chains are safer and more sustainable,” said Noble.

“Employing trained and skilled professionals with a licence to practise will go a long way towards realising this potential.”

*The CIPS Supply Chain research is based on an international survey of 645 procurement and supply chain executives conducted from 18-29 May 2015. The sample included 82 supply chain managers in South Africa, 460 in the UK and 63 in Australia. All respondents are CIPS members at manager level or above.