New Report Shows the Negative Effects of Outsourcing and Expanded Supply Chains

Emily — Wed, 04 Nov 2009 15:33:45 +0000

Over the past few years, we have seen companies outsource more and more, and as a result supply chains have grown more complex. The goal of this outsourcing was to reduce costs – if a manufacturer can get their supplies cheaper by using an outside source, then of course they are going to go with the most economical decision. The more a company outsources, the more complicated their supply chain becomes, and according to a new study released by the Business Continuity Institute, the greater the risk for supply chain disruption. The manufacturing industry in particular has been the hardest hit from supply chain failure – manufacturers have reported a 58% increase in disruption to their supply chains over the last 12 months, compared to 35% across all industry sectors.

The reason for this increased supply chain disruption is because if more parties are involved in the supply chain, there is a higher risk for one of those parties having a problem, such as financial failure, and causing issues for the entire supply chain.

According to one director at the Business Continuity Institute, quoted in the press release,

“We’re now seeing the downside of years of outsourcing, extended supply chains and focus on core competency; organizations are now much more vulnerable to supply chain disruption than in the past. While companies have banked the cost savings, this research indicates they have still to make the corresponding investment in resilience. The economic recession, in particular, is exposing vulnerabilities and dependencies through supplier insolvencies, reduced capacity and the tightness of credit markets. Business continuity management provides a robust and proven approach to prepare an organization for and protect against disruption in its supply chain.”

Communication among suppliers, forwarders, carriers, customs brokers, and all trading partners involved is very important to avoid the risks associated with a complex supply chain. For tips on how large, mid-market, and small companies are improving their supply chain performance, please read the Aberdeen Group’s Global Supply Chain Benchmark Report (free download!).

A summary of the above BCI report is available for download here, and the press release can be found here.

Supply Chain Visibility Best Practices » Outsourcing

New Report Shows the Negative Effects of Outsourcing and Expanded Supply Chains