It’s the economy, stupid

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MaloryDavies.jpgThe news is full of the Ebola epidemic and war in the Middle East. But these are not the biggest threat to global supply chains – in Bill Clinton’s well-worn phrase: It’s the economy, stupid.

At least that’s the conclusion of the latest CIPS Risk Index. The overall index score fell in the third quarter, indicating lower global operating risk.

While the quarter saw supply chain risk in the Middle East and sub-Saharan Africa increase, the study found that “neither the Ebola outbreak nor the advance of Islamic State has delivered a significant increase in international supply chain risk”.

“Businesses from London to Laos are reliant on the economic stability of a handful of countries, whose goods and services touch on supply chains across the world,” says John Glen, economist at the Chartered Institute of Procurement and Supply, and senior economics lecturer at The Cranfield School of Management.

“Economic faltering in China and Germany will therefore have a distorting effect on the riskiness of global supply chains which could well extend deep into 2015 and across all industries.”

This has significant implications for supply chain planning in the coming year. Glen points out that supply chain professionals will “increasingly be trying to balance the desire to hold sufficient inventory to meet emerging sales opportunities with the risk of investing just as the growth of demand starts to slow”.

And that suggests that agility will be at a premium in the coming year.

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