Risk 'a growing concern' for logistics supply chains

Date: 16/02/2012 16:57:21

The transport and logistics industry faces a number of different issues to successfully complete the delivery of goods around the world.

From having to cope with moving goods over vast distances to transporting goods through customs which can vary between nations, there are a lot of factors that need to be taken into account when delivering products.

While these issues have long been felt across the industry, there are some more concerns that are starting to affect how firms make plans for their logistics services.

An emerging trend for companies is for them to address concerns relating to risk, with a new study from KPMG's latest global CFO Consumer Markets survey.

Retailers and manufacturers alike are increasingly focusing on the level of risk in their supply chain, as the Turning global risk into an opportunity study of 350 senior finance executives found the increasingly global nature of the distribution industry means there are more issues to consider than had been the case in the past.

The biggest concerns among the companies in the retail, food, drink and consumer goods manufacturing industries were found to be facing related to the current economic uncertainty affecting many areas of the world, with 44 per cent of respondents citing this as their main worry.

Political instability was stated to be the second biggest concern for companies, with the recent clashes seen in China, across the Middle East and now in some areas of the Eurozone all affecting confidence.

The global issues which can effect the supply chain have also been cited as a cause for concern by many business, with the natural disasters that have affected many areas in the last 12 months all shaking confidence.

With the earthquake and tsunami in Japan, floods in Thailand and the earthquake in New Zealand among just some of the incidents which affected the supply chain over the last year, some companies are considering these unpredictable events to be among the greatest risks to them.

Both Sony and Honda has been affected by the supply of parts being unable to reach their factories as a result of these disasters, with the electronics company predicting it will see its losses for this year double as a result of not being able to obtain parts from Thailand.

Honda is also hoping for better fortunes this year after the Japanese tsunami affected the production of parts for shipment worldwide, with the company's chief executive even stating he had spent the new year in a shrine to pray for better fortunes.

As a result of this concern over risk, companies stated they are now spending more time in the boardroom discussing strategies to implement should something go wrong in the production or supply chain.

Over the past two year, the study found the numbers holding weekly risk meetings had increased from seven per cent of companies surveyed to 19 per cent.

In addition, the numbers that were carrying out this form of study once a year was found to have slipped to just six per cent.

"Both manufacturers and retailers with their diverse distribution networks and complex supply chains are often exposed to a wide-variety of risks, especially those operating internationally; traditionally, however, they have been less inclined to undertaken risk reviews at an enterprise-wide level," said Gerry Penfold, risk consulting partner at KPMG.

He highlighted how more regular communication between senior members of staff on risk issues will result in a greater level of resilience during a time when there is increased uncertainty.