Global supply chain risk remained ‘stubbornly high’ in the Q3 2015 Chartered Institute of Procurement & Supply (CIPS) Risk Index, powered by Dun & Bradstreet, as interconnected geopolitical developments threaten to redraw the supply chain map.
The cross-border presence of ISIS throughout the Middle East, the subsequent re-introduction of border controls within Europe's Schengen zone and the easing of US sanctions on Iran and Cuba are starting to shift the global flow of products and services into new, unknown territory.
Dun & Bradstreet analysed 132 countries against a number of criteria, including level of exports, to assess issues and challenges along the supply chain to produce a global risk score. Global supply chain risk stands at 79.1 in Q3 2015, only slightly down from the record high of 82.4 two years ago and considerably higher than the pre-financial crisis level of just 40.4 in Q4 2003. In Q3 the reliability of global supply chains has been undermined by the rise of radical Islam, a more assertive Russia, unstable commodity prices and the prolonged fallout from the 2008 economic crisis. At the same time, the growth of longer and more complex supply chains allow regional disruptions to cripple supply chains hundreds of miles away.
John Glen, CIPS Economist and Senior Economics Lecturer at The Cranfield School of Management said:
"Supply chain risks have often felt remote and barely visible to even the most trained eye. In today's environment, risks affecting supply chains feature daily on our television screens. The European migrant crisis and conflicts in the Middle East mean that the risks are getting closer: and are feeling more acute.
"For a long time we have taken for granted our interconnected world, enjoying its benefits for the most part. We are currently seeing the flip side of the coin. Supply chain managers will need their wits and skills about them if these uncertain times are to be navigated expertly.
"Dealing with global supply chain risk requires extensive skills. An ability to interrogate and innovate to provide solutions for businesses and customers will be paramount if we are to keep global supply chains flowing."
Calculations for the CIPS Risk Index is composed of multiple unique assessments undertaken by Dun & Bradstreet's in-house team of over 40 economists, data analysts and contributors working in-field across the world. In all, 132 countries (comprising 90+ percent of global economic activity) are assessed across nine categories, on a monthly basis. The individual country scores are then aggregated to calculate a global supply risk score. The weights used for each country is based on the contribution each country makes to total global exports (in theory, their individual contribution to global supply chains). The trade shares are anchored to data for 2010 to facilitate consistent comparison of the index scores over time. The regional scores are done in the same way, aggregating across all countries in the region based on their contribution to total exports.To read the full report, please click here (PDF).