Supply chain risk falls for third straight quarter

Global supply chain risk fell for the third straight quarter to 80.3, down from 81.3 in the second quarter, according to the Chartered Institute of Procurement & Supply Risk Index powered by Dun & Bradstreet.

Nevertheless, the index remains close to the all-time high of 82.6 in the fourth quarter 2016.

The index fell in the third quarter despite global political uncertainty and the on-going renegotiation of long-standing trade deals, such as the North American Free Trade Agreement and the UK’s membership of the European Single Market.

Although the damage caused by Hurricane Harvey in the US had a localised impact on supply chains, it did not have a discernible impact on the global supply risk index, with North America’s contribution to global risk decreasing from 7.0 per cent in the second quarter to 6.8 per cent in the third quarter.

The largest drop in risk was in Western & Central Europe, where a series of stabilising political outcomes helped to reduce the region’s contribution to global risk from 24.7 per cent in the second quarter to 23.9 per cent in the third quarter. The formation of a government in Macedonia following months of political deadlock and the abandonment of street protests by the opposition Democratic Party in Albania helped to stabilise the region and reduce risk.

On top of this, the EU Free Trade Agreement with Canada came into force in September, eliminating many taxes and duties on goods traded between the EU and Canada. The EU also appeared to make progress in talks with Japan and Indonesia about FTAs in the future.

“Although supply chain risk has fallen for three consecutive quarters, it remains close to its all-time high and businesses must prepare accordingly. In a period of prolonged supply chain risk, it’s crucial that businesses have a network of alternative suppliers when disruption inevitably hits,” said CIPS economist John Glen.

“The outcomes of various on-going negotiations, such as Brexit and NAFTA, could change the face of global trade and cause significant disruption to supply chains in the future. This could cause delays, increase costs or reduce the quality of supplies businesses have access to, so it is now more important than ever for businesses to have robust contingency plans in place.”