Supply Chain Reality: Risk Tied to Smaller Pool of Suppliers

Without question, today's supply chain applications can provide unmatched visibility into a company's supplier base, help spot inefficiencies and allow for better, smarter decision-making on logistics and inventory.

But if several manufacturers in your Chinese or European network suddenly shut down, there's not much software can do at that point. You're on your own.

That is, in fact, a problem that's been staring at companies big and small since the recession began in earnest last fall, and has been amplified each month as new manufacturing data surfaces showing even more risk and uncertainty.

For the Fortune 500 set, for instance, data from CVM Solutions (a supplier-management software vendor) shows that the world's biggest companies rely on a relatively small pool of the same suppliers. And when businesses in this pool sink, it can ultimately mean "interruptions in business operations, financial loss and damage to brand reputation," notes a recent report from CVM.

"Years of strategic sourcing and supplier consolidation has created a dangerously small group of suppliers that receive most of the Fortune 500 companies spend," states the report. "If these common suppliers become 'high risk' suppliers, then that risk will likely impact a high percentage of Fortune 500 companies."

This scenario is likely to become more visible in the auto industry with General Motors' recent bankruptcy filing, as the harsh ripple effects fan out into the global auto parts supply chain.

Sign up for ITworld's Daily newsletter
Follow ITworld on Twitter @IT_world

• Email
• Print
• Share
  • Slashdot
  • Digg
  • Stumble
  • Reddit
  • Newsvine