SC risk trumps cost containment

Asia - Supply chain executives in Asia rank supply chain risk management more important than cost containment, a surprising find considering today's emphasis on saving bottom lines. 

IBM's Global Chief Supply Chain Officer Study found that risk management (82%) ranked higher on a list of top challenges amongst supply chain executives in ASEAN than cost containment (78%).

Yeonho Yoo, partner, industrial sector and supply chain management leader for growth markets unit inclusive of Asia Pacific region at IBM Global Business Services describes this as a surprising find. "This shows that ASEAN executives have a higher level of alertness to the macro factors which potentially impact their business."

Yoo however stressed that while supply chain risk management has been identified as one of the major challenges facing supply chain managers today, companies are not tackling the problem in a comprehensive or structured way. "There is a discrepancy between what chief supply chain officers (CSCO) want to do, and what they actually do," Yoo says.

Other challenges identified included supply chain visibility (78%), increasing customer demands (57%) and globalisation (52%).

The study also found that while buyers have cashed in on the benefits of low cost country sourcing (LCCS) in the past, the risks that accompany it have been expounded, especially with the global financial meltdown shutting down factories and limiting supply. Many companies are encountering issues with global sourcing, including unreliable delivery (65%), longer lead times (61%) and poor quality (61%), the study says.

Further, to counter longer lead times, supply chain managers have increased global inventory levels, leading to higher inventory costs. "By extending the supply chain over the world, we have invariably increased inefficiency in terms of inventory and lead times," says Sanjeev Nagrath, partner, global supply chain management leader at IBM Global Business Services.

In light of this and a quest to free up credit, Nagrath believes there will be an added importance of warehouse management systems and inventory optimisation going forward.  

Nagrath however trusts that procurement strategies will continue on the LCCS path, but there will be a stronger focus on regional sourcing, as well as a tapping of other markets including eastern Europe, and Latin America.