Australian businesses taking risks with long, unmanaged supply chains

A global survey of supply chain managers has been described as a “wake up call” for Australian businesses, with 70% of businesses unable to guarantee their supply chains are free from malpractice, including child labour, slavery, fraud or corruption.

The research has highlighted the potential risks associated with long, complex supply chains, with 57% of Australian respondents admitting to having zero visibility beyond the second tier of their supply chain, and only a quarter of businesses having visibility of their entire supply chain.

The survey of 645 supply chain managers worldwide also found:

• Half of supply chain managers admitted to avoiding a major crisis in the past 12 months.
• Only 8% of businesses have close relationships with suppliers at all stages of their supply chains.
• 1 in 5 Australian businesses have lost out financially because of poor supply chain management.

Four out of five (79%) Australian businesses surveyed currently outsource from emerging markets in Asia. According to David Noble, Group CEO of the Chartered Institute of Procurement & Supply (CIPS), emerging risks associated with poor practices and standards in these markets are hard to manage: “By increasingly turning to emerging Asian suppliers to maintain their price competitiveness, businesses are also becoming more exposed to risk. Having visibility and good supplier relationships at the first tier of the supply chain is clearly no longer enough, as these risks do not always exist in the first tier, but often further down supply chains.”

With consumers increasingly willing to punish brands with a bad reputation by going elsewhere, the risks for business of being associated with malpractice in their supply chains can easily outweigh any savings from lower labour and operating costs.

“Supply chain issues such as poor health and safety standards for workers, labour abuse and environmental degradation are endangering both consumers and the economy. Despite that, there has been so little action in this area from Australian businesses,” said Noble.

Should a supply chain crisis occur, over half (54%) of Australian businesses admit they do not have a risk mitigation strategy in place all the way down their supply chain. When coupled with data which shows that only two in five (43%) would take responsibility upon themselves for any disruption, then there are clearly concerns about where responsibility and accountability begins and end, according to the CIPS.

“Only by investing in a better understanding of the principles of good supply chain management and also forging closer relationships with suppliers across the entire network can Australian businesses ensure their supply chains are safer and more sustainable. Employing trained and skilled professionals with a licence to practise will go a long way towards realising this potential,” said Noble.