In a survey of 59 global consumer and retail companies, almost three-quarters of respondents said that reducing costs was the main reason for sourcing globally, yet one-fourth did not know what their savings were. Half could not measure the hidden costs caused by monitoring suppliers and complying with social / environmental standards.

of a quality failure and increases the reputational damage that will result. Major US retailers are especially sensitive about these matters, and now require that suppliers meet their own standards for product quality, testing, and safety.

Recently, PricewaterhouseCoopers surveyed supply chain managers from 59 global consumer and retail companies –– large brand-owners particularly sensitive to both the reputational and operational risks of supply chains.

At the same time, companies across industries are confronting cost increases and the difficult decision to raise prices. To avoid passing along price increases to consumers, some are searching for further efficiencies in their supply chains. This is a drive that presents both opportunities and risks. A retail industry executive described the challenge: “When the focus sharpens on costs, you know that more chances are going to be taken. There are companies that will narrow the assortment to make their supply chains less costly and more manageable. But when such steps are taken, it is the consumer who suffers.”

The chart on the previous page, “Supply Chain Executives: Keenly Aware of Risks to Supply Chain Integrity …”, shows that more than two-thirds of all respondents believe product safety is the greatest risk to supply chain integrity.

 

But the chart below it (“…But Less Certain of Their Ability to Manage these Risks”) shows that less than half of respondents are “very confident” in their company’s controls to manage this risk.

PRESSURE CREATES NEW OPPORTUNITIES

In some instances, companies are actually benefiting from pressure to modify their supply chains. For example, volatile energy prices have forced many companies to examine their transportation expenses, sometimes prompting innovative approaches that promise savings under any circumstances.

Even fewer are very confident about their companies’ ability to manage risks around business ethics, working conditions, carbon emissions, and local economic development.

General Mills is one CPG company that is reconfiguring its product packaging so that more goods can be loaded on trucks. Says Tom Forsythe, vice president of corporate communications, “If you are delivering more goods with the same amount of fuel, that’s sustainability in action, but it is also productivity.”

RISK PREPAREDNESS: A QUESTION MARK?

Companies are aware that their extended global supply chains are vulnerable to risks. But how well are companies prepared to manage those risks? Research shows that supply chain managers are uneasy about the future.