The latest quarterly ‘Global Supply Chain Risk Report’ from Cranfield University and Dun & Bradstreet reveals that continuing uncertainty about Brexit is driving manufacturers and retailers to explore riskier strategic sourcing options by finding suppliers in lower-cost but higher-risk countries to escape trade barriers.
Supply relationship management, it appears, has become a good deal more fraught for UK procurement professionals.
The new study reveals significant rises in supplier criticality and global sourcing risk.
Cranfield University’s Dr Heather Skipworth, Associate Professor in Logistics, Procurement and Supply Chain Management, explained that continuing uncertainties over possible trade tariffs are forcing firms to modify strategic sourcing operations in the search for alternative countries to source from.
She said: “The manufacturing sector in Europe is facing the ongoing uncertainty around Brexit, encouraging many businesses to take more risks with the location of suppliers to avoid the possible trade tariffs and other non-tariff barriers such as quotas, embargoes, sanctions, and levies.
“This is likely to increase their perceived criticality of, and dependency on, suppliers, as choices become more constrained.”
China, she noted, was no longer considered an attractive source of inexpensive manufacturing as wages were rising vigorously there, which meant that many British firms were now exploring higher-risk countries such as Vietnam, Bangladesh and Romania.
The report covered four risk areas, each of which was found to have risen substantially.
Supplier criticality was up by 6.7%, financial risk by 2.1%, global sourcing risk by 10.6%, and foreign exchange risk by 4.6%.
This translates into more firms sourcing from higher-risk countries and becoming more dependent on suppliers that are in turn likely to carry higher financial risks and an increased probability of becoming insolvent.
Acknowledging the elevated risks, Dun & Bradstreet’s head of UK product and strategy Chris Laws said that businesses can still implement measures to alleviate the dangers.
Full visibility of supply chain relationships will be crucial, he said, as will diversifying the range of suppliers across multiple locations.