High risk and lack of trust. The coming crises of confidence for Australian supply chains

In Articles Posted October 4, 2016 at 12:15 pm
By Melissa Wraith

crises of confidence in Australian supply chains

Australia, by virtue of its geographical isolation, sits at the end (or beginning) of what are by any definition long supply chains. Moving anything into or out of Australia is more challenging simply because of the “tyranny of distance.” Chartered Institute of Procurement & Supply (“CIPS”) Australian Managing Director Mark Lamb recently said: “The growing complexity of supply chains, coupled with a heightened focus on supply chain risk, are (sic) changing the role of supply chain managers. “There is already evidence showing a fundamental shift in the role and priorities of supply chain managers, from a traditional cost control role to one that increasingly prioritises managing risk and building fair and sustainable supply chains.”

crises of confidence in Australian supply chains

Source:  CIPS Risk Index Q4 2015

CIPS found that the roles of Australian supply chain managers expand and extend well beyond traditional boundaries of simply controlling the flow of products and raw materials into and out of Australia. Because of the changing nature and complexity of logistics and supply chains, their responsibilities are taking on more of risk management flavour and including fraud prevention, partner relationship management – even in some cases to identification of human rights abuses, further down (or up) the chain.

Together, factors such as these pose increasingly serious commercial and financial risks to the sustainability not only of individual businesses, but to the whole economy.

A low point in trust and confidence

At a time, where according to CIPS, supply chain risk in the Asia Pacific region is reaching an all-time high; Australia faces a looming crisis of confidence and trust in our supply chain and logistics management capabilities. A recent CIPS survey of 645 global supply chain experts and managers, revealed that almost half (48%) of all Australian supply chain managers say that their employers are failing to equip them with the skills and training they need to do their jobs and avert major crises.

The CIPS Risk Index also highlighted a core of inadequately trained supply chain managers actually failing to prevent errors and poor management, not properly investigating the origin of raw materials and not following best practice. Eighty percent of respondents to the survey called out inadequate training and support and conceded the very real possibility of undetected faults or negligence in their supply chains. Fewer than 18% said they were even able to see the entire length of their supply chains.

CIPS MD Mark Lamb says expertise has never been more important. “You wouldn’t trust an inadequately skilled surgeon using outdated equipment to operate, but that is often what is happening in the management of Australian supply chains. It is a looming crisis that requires immediate action.”

Asia Pacific region contributes most to risk

The Q4 2015 CIPS Risk Index observed these findings, and revealed that global supply chain risk has jumped to its highest level since late 2013 – and that the Asia Pacific region contributed more to that risk than any other geography.

The rise has been predominantly driven by a continued tightening of credit in China, which has forced managers to look much more closely at how robust and reliable their Asian supply chains really are.

Magellan Logistics has been navigating global supply chains for Australian fashion, footwear, textiles and retail businesses for 20 years.

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