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Companies failing to address supply risk, says report

18 April 2011

Risk analysis is currently a "weak link" in the strategic sourcing process for many companies, according to new research.

The Aberdeen Group's report, entitled The State of Strategic Sourcing, collected information from 315 organisations around the world about this vital procurement function.

It found that only 35 per cent of firms assess supply risk as part of their strategic sourcing efforts, Supply Management reports.

The report warned that an appreciation of risk is highly important because suppliers "could face bankruptcy or supply chain disruption issues, causing not only an increase in cost, but also adverse effects for organisations relying on raw/direct materials for product development".

Companies seeking to improve their sourcing performance have several options at their disposal, according to the research firm.

These include enhancing their spend analysis capabilities and increasing collaboration between procurement and finance functions.

Last month's catastrophic earthquake and tsunami in Japan offered a reminder of the importance of supply chain planning, with companies that rely on electronic components produced in the country expected to face severe difficulties.

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Categories: Commercial

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