Global supply chain relies on too few suppliers

The global supply chain could be undermined by an overreliance on a small group of suppliers. Resilinc, the leading provider of supply chain resiliency solutions, has revealed research that shows the same group of sub-tier suppliers are a key link in global supply chains. This reliance creates an increased risk concentrated on just those suppliers and could pave the way for significant and crippling supply chain disruptions should those vendors fail for any reason. However, because these organisations are used deep in the supply chain, most companies will not be aware of the risks they are exposing themselves to. “As a result, they are not adequately prepared to mitigate those risks to ensure global supply resiliency,” said Jon Bovit, of Resilinc. The report is the result of a survey of hundreds of suppliers, spread over 50 countries. Recilinc carried out an analysis of the data in order to determine risks and improve their client offering. It found that global supply chain risk is focused on certain sub-tier suppliers and areas, with companies relying on their services much more vulnerable to disruption. “More specifically, in the high-tech and automotive supply chain, a vast majority of suppliers are dependent on sites that are owned by just four suppliers: Taiwan Semiconductor (TSMC), Amkor Technology, ASE and United Microelectronics (UMC),” Mr Bovit said. In addition, the study found that more than half of all the sites analysed were in one of just four countries – Taiwan, China, the US or Japan. “The study further found that a high degree of supplier factory aggregation in a relatively small sub-set of regions creates global supply chain hotspots, and many of these hotspots for high-tech and automotive suppliers are in areas known for susceptibility to natural disasters.” Risks to businesses of a lack of transparency in their supply chain were illustrated following the earthquake and tsunami in Japan 2011. Many organisations were not even aware that their supply chain was at risk until the damage was already done.