Risks mount in retail supply chains

Traditional stores under pressure to compete with online offerings may face increasing exposure to risk if they are forced to cut costs in their supply chain, according to the latest Global Supply Chain Risk Report, by Cranfield School of Management and Dun & Bradstreet.

It found increased levels of risk-taking since the fourth quarter of 2018, with retailers reporting high levels of dependency on suppliers and indicating a propensity to off-shore to low-cost, high-risk countries where suppliers are more likely to be financially unstable.

The report said more than 7,500 shops closed in 2018. Dr Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield, said: “Analysis suggests that the sector is sourcing more from low cost regions, which are often associated with heightened risk and potential for supply chain disruption caused by political, environmental, or economic factors. There is also an increased probability of suppliers themselves being financially unstable in these countries. To mitigate against these risks, it is imperative retailers ensure they are practising dual supply strategies to help manage the trade-off between risk and cost and ensure smooth running of operations.”

Data for the first quarter of 2019 shows the retail sector experienced the greatest increase in risk since the fourth quarter of 2018 out of the seven sectors measured, with three out of the four metrics increasing significantly. Three out of the four metrics are also at the highest level of all seven sectors reported.

Chris Laws, product leader at Dun & Bradstreet, said: “In a challenging economic environment, risk-taking is understandable, but retailers need to ensure they have a full picture of supply chain relationships to flag potential risks and protect their reputation.”

The report is available here.