A new report suggests that growing pressure on the retail sector could increase risk-taking in the supply chain, resulting in further store closures and collapse of well-known brands.
The analysis, published by Cranfield School of Management and Dun & Bradsheet: ‘Global Supply Chain Risk Report,’ cites the fact more than 7,500 stores closed in 2018, with many high street brands hitting the headlines with profit warnings.
The new data shows increased levels of risk-taking since Q4 2018, with retailers reporting high levels of dependency on suppliers and indicating a propensity to off-shore to low-cost, high-risk countries where suppliers are more likely to be financially unstable.
“We know from recent news headlines about store closures, and the collapse of well-known chains, that the UK retail sector is under huge pressure at the moment. With many consumers preferring to do their shopping online, any retailer with a bricks and mortar footprint will be feeling the pressure,” said Dr Heather Skipworth, Senior Lecturer in Logistics, Procurement and Supply Chain Management at Cranfield.
“Analysis suggests that the sector is sourcing more from low cost regions, which are often associated with heightened risk and potential for supply chain disruption caused by political, environmental, or economic factors. There is also an increased probability of suppliers themselves being financially unstable in these countries. To mitigate against these risks, it is imperative retailers ensure they are practising dual supply strategies to help manage the trade-off between risk and cost and ensure smooth running of operations.”
Chris Laws, Product Leader at Dun & Bradstreet, said: “With retailers under pressure to identify cost efficiencies, it’s more important than ever for them to know exactly who they are doing business with to help minimise risk and ensure compliance with regulations.
“Having robust due diligence processes in place is key to ensuring the stability of the supply chain and maintaining responsible, ethical procurement practices. In a challenging economic environment, risk-taking is understandable, but retailers need to ensure they have a full picture of supply chain relationships to flag potential risks and protect their reputation.”
Using four key metrics – supplier criticality, supplier financial risk, global sourcing risk, and foreign exchange risk – the Global Supply Chain Risk Report investigates the level of perceived supply chain risk faced by European companies with international supplier relationships.
The Q1 2019 Global Supply Chain Risk Report is available to download now from https://www.dnb.co.uk/perspectives/corporate-compliance/q1-2019-global-supply-chain-risk-report.html
