The increasingly global business of electronics has the supply chain at its heart, making supply chain resilience a crucial business strategy for executives to consider. Threats to resilience top the list of worries—but many organizations find it difficult to plan or measure these threats.
"There's a fair amount of volatility with oil prices and that is a big driver for changes in resilience," Eric Jones, vice president and global manager of Business Risk Consulting (BRC) at global insurance company FM Global told EBN in an interview. "Political volatility and terrorism are also pressing concerns."
Released earlier this week, the 2016 FM Global Resilience Index ranks of countries' business resilience to supply chain disruption. The index aggregates available data to help executives explore key supply chain risks that can harm their performance in order to better select suppliers and site facilities; evaluate the resilience of established supply chains; and identify vulnerable customers.
"Resilient supply chains give businesses a distinct advantage by protecting their operational integrity, revenue stream, market share and shareholder value," said Bret Ahnell, executive vice president at FM Global. "A fragile supply chain, on the other hand, often harms the company involved, sometimes for the long term."
The results are informative and even eye opening—and point to the impact of some of these trends. For example, the gross domestic product (GDP) of Kuwait (ranked 59 in the index) and Columbia (ranked 110) have been impacted by lower oil prices, Jones said. Meanwhile, in 2016, deadly acts of terrorism have occurred in such countries as Pakistan (ranked 117), Belgium (ranked 17), Côte d'Ivoire (ranked 58), Nigeria (ranked 116) and Turkey (ranked 79) and, as a result, these countries are much more risky.
The index demonstrates the tradeoffs that must always be considered when making sourcing decisions, and that no country is without risk. Instead, it's important to consider what the acceptable type and level of risk are for your organization. Jones pointed to Japan as one example. The country (which ranked 33 in terms of risk, offers benefits that include strong infrastructure, high-quality suppliers and low levels of corruption. On the downside, the country has massive exposure to natural disasters and many organizations don't manage risk management well, Jones said.
"Fundamentally, it comes down to when you are linked to global partners, you have to know where facilities are located and how comfortable are you with their ability to withstand a catastrophe," Jones said. "Risk and reward are highly correlated. Doing business in countries with poor ranking in the index is not necessarily a bad thing. However you have to understand the magnitude of the risk."
By understanding the risk, electronics OEMs have a place to start conversations with suppliers about how to minimize risk "Data like this enables those conversations to start, which improves resilience in the supply chain of everyone involved," Jones said.
The infographic below outlines some of the key findings of the index. Take a look and let us know how it lines up with the risks that you've identified in your supply chain.
— Hailey Lynne McKeefry, Editor in Chief, EBN