Two thirds of small companies unprepared for supply chain failure

A majority of SMEs lack a risk mitigation strategy in the event of a logistics crisis.

Only 11 per cent of UK businesses currently have a close relationship with suppliers at all stages of their supply chain, according to research from the Chartered Institute of Procurement and Supply (CIPS).

UK businesses with close supplier relationships are 1.5 times more likely to have avoided major supply chain crisis in the past 12 months and four times more likely to have complete visibility of their supply chain.

Companies are still significantly unprepared for another supply chain crisis more than two years after the horsemeat scandal, the study suggests.

The research, carried out across senior supply chain managers and procurement professionals worldwide, reveals that two thirds (66 per cent) of UK supply chain professionals either do not have or are unaware of a risk mitigation strategy which covers all the tiers of their supply chain.

Risk mitigation strategies ensure businesses and countries maintain important supplies during an unexpected crisis (such as a conflict or natural disaster) which might impact on foreign suppliers.

Furthermore, only 11 per cent of supply chain managers maintain a close relationship with their suppliers.

The majority (56 per cent) of businesses with close supplier relationships up to tier three and beyond also have complete visibility of their supply chain, whilst businesses with relationships with tier one suppliers only, just 13 per cent.

Close working relationships, as well as a close company board oversight of suppliers, can be critical to help develop trust, transparency and help monitor good behaviour throughout the supply chain, says CIPS.

David Noble, CIPS group CEO says that businesses can outsource the production of their goods to remote suppliers, but they cannot outsource accountability and responsibility for the conditions in which these goods are produced and where raw materials are sourced.

‘As UK companies are increasingly using suppliers in emerging markets to maintain their price competitiveness, they are becoming more exposed to reputational risks such as poor health and safety standards for workers or even enforced slavery, bribery and corruption, as well as environmental degradation.

‘Having visibility and strong 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.’

Noble adds that best practice requires a thorough understanding by companies of who their suppliers are.

‘Many procurement professionals will be confident they have this understanding, but this knowledge is incomplete. Professionals and buyers must have a licence to practise so business, and governments can be confident of where responsibility and accountability lies in purchasing decisions.’

Further reading on supply chain logistics

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Supply chain