Global Lack of Knowledge About Supply Chains Worries Industry Leaders

Image via Flickr by stephenhanafin

Just as horrifying stories about factory collapses in Bangladesh and Cambodia, as well as the horsemeat scandal in the United Kingdom, hit the newsstands, a new report indicates that companies are woefully unaware of their suppliers. The new study, released by the logistics management company Achilles, indicates this lack of visibility is a serious threat to our global economy.

Of the 131 supply chain directors polled, one in five had no idea which suppliers their suppliers were using, or where these suppliers were located. The study suggests that small to medium size companies are the worst about being in the dark, with one-third of these companies having little or no knowledge about their suppliers. Numbers were a little better in larger companies, where 13 percent of directors in companies with an annual turnover of more than $1 billion lacking critical knowledge about their suppliers.

These statistics are shocking, considering supply costs for average companies amounts to 70 percent of gross revenues. In some industries, such as chemical manufacturing, this percentage skyrockets another 15 times. According to spokespersons from Achilles, this lack of supplier knowledge risks disruption of the companies’ operations and also risks their reputation.

For example, Primark and Benetton lost millions of dollars trying to make things right with workers and their families after 600 people were killed and many more injured in a factory collapse in Bangladesh. Asiacs sneakers is facing similar issues following the collapse of one of their supplier’s factories in Cambodia, which killed two workers and injured seven more.

But these public relations problems pale in comparison to the embarrassment of supermarkets in Great Britain and Ireland, where imported frozen meals were found to contain as much as 100 percent horsemeat and pig meat when the packaging clearly stated the meat was 100 percent beef.

The automotive industry apparently learned their lesson from the supply chain disruption following the earthquake and tsunami in Japan in 2011. Auto makers such as Aston Martin and Jaguar are teaming up with Toyota and Achilles to thoroughly map their supply chain so problems can be addressed before the supply chain is disrupted.

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