While many supply chain executives are well aware of the risks facing their supply chains and the undesirable consequences, many are still not developing and executing strategies to properly manage identified risks. This finding is according to a new study, Managing Risk in the Global Supply Chain, sponsored by UPS Capital, and conducted by the Global Supply Chain Institute at the University of Tennessee.
UPS Capital is a business unit of UPS that enables smarter trade through insurance, trade finance and payment solutions. Through its affiliates, UPS Capital offers risk mitigation solutions in Europe in the following countries: Germany, France, Italy, Spain, Switzerland, Austria, Belgium, the Netherlands, Ireland, and the United Kingdom.
One of the study’s major findings was, of the 150+ firms surveyed, 90 percent did not formally quantify supply chain risk when outsourcing production, and not one of the surveyed participants used outside expertise to help assess supply chain risks. “We were surprised by some of the findings regarding the lack of mitigation strategies,” said Dr. Paul Dittmann, ?executive director of the Global Supply Chain Institute and the study’s author.
“The supply chain is one area of a company where executives are faced with balancing operational efficiencies, all without actually having direct control over many of the moving parts, thus making risk mitigation strategies almost essential to operations. Any business that does not have some basic form of risk mitigation plans in place is simply gambling with its existence,” stated Dittmann.
This study also yielded other important findings, including that most participants’ companies have risk managers somewhere in the company, often in the legal and finance areas. However, most of these risk managers are not aligned to supply chain risks, resulting in significant gaps in companies’ overall mitigation strategies.
“We all know the threats are very real, and there are multiple ways to mitigate risk,” said Dave Zamsky, vice president of marketing for UPS Capital. “Based on the finding of the study, while supply chain executives acknowledge insurance as a major way to mitigate losses, it is not on their radar screens. Two of the easiest risk mitigation strategies to implement are financial and insurance solutions. Through products like UPS Capital’s trade credit insurance, which helps companies mitigate risks when expanding their markets; and cargo insurance, which protects customers’ goods in transit, companies can easily begin to apply basic risk mitigation strategies. Providers like UPS Capital have a vested interest in helping businesses avoid losses and prepare for the unknown.”
About the Study
The study encompassed a quantitative survey of more than 150 supply chain executives with international operations and qualitative interviews with executives from six companies. The companies surveyed included both interviews and written responses. Companies ranged in size from $300m to $80bn and covered a cross section of industries.
