Poor supplier relationships hurting businesses
A new survey of 645 supply chain managers worldwide shows that 57 per cent of companies in Australia admit to having zero visibility beyond the second tier of their supply chain, with only a quarter of businesses having visibility of their entire supply chain.
The findings come at a time when supply chains are becoming longer and more complex. Four out of five (79 per cent) Australian businesses surveyed currently outsource from emerging markets in Asia, however, less than one in ten of Australian procurement managers have a close relationship with suppliers beyond tier two of their business’ supply chain.
According to David Noble, group CEO of the Chartered Institute of Procurement & Supply (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. 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,” Noble said.
One in five supply chain managers in Australia admit to having lost out financially in the past 12 months as a result of poor supplier relationships. With consumers increasingly willing to punish brands with a bad reputation by going elsewhere, the risks for business of being associated with malpractice in their supply chains can easily outweigh any savings from lower labour and operating costs.
The opaque nature of Australia’s supply chains means that businesses are increasingly and dangerously exposed. This research shows 70 per cent 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. Despite that, there has been so little action in this area from Australian businesses,” said Noble.
Should a supply chain crisis occur, more than half (54 per cent) of Australian businesses admit they do not have a risk mitigation strategy in place all the way down their supply chain.
When coupled with data which shows that only two in five (43 per cent) would take responsibility upon themselves for any disruption, then there are clearly concerns about where responsibility and accountability begins and ends.
The survey also reveals detail of the unseen disasters that are averted by Australian businesses on a regular basis. With half of supply chain managers admitting that a major crisis has been avoided in the past 12 months, the figures highlight the scale of the challenge facing Australian companies.
“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. Employing trained and skilled professionals with a licence to practise will go a long way towards realising this potential,” said Noble.