Companies Should Do More to Account for Risk in Their Supply Chains
Excerpted from Business Review Weekly: "Long Supply Chains Stretch Risk"
5 July 2007
Business Review Weekly
"Before you outsource, you need to price in all the elements of risk within the system, as well as the external types of risk."
As companies cut costs by outsourcing, they move into unfamiliar territory, making themselves dependent not only on their own suppliers but suppliers of suppliers and other subcontractors. ... They also depend on critical infrastructure in remote regions of the world.
"Companies have not priced the risk profile into these costs savings... Now they have to go back and rethink those costs."
The risks include potential damage to reputations as a result of things that happen in an overseas supply chain... [and] the stretched supply of management expertise and talent in China means that it is getting harder to control product quality and logistics chains.
