Financial instability is ‘ticking time-bomb’ for supply chains

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Financial instability is a ticking time-bomb and manufacturers must act now to protect and prepare their supply chain, PwC warns in a new report, Achieving excellence in production and supply.

The report highlights five areas that manufacturers need to focus in the current world economic conditions:

* identifying and acting on supply chain risks

* stronger collaboration between suppliers and customers.

* linking demand planning with the rest of the supply chain

* skills and talent

* addressing lifecycle opportunities

Barry Misthal, head of PwC’s global industrial manufacturing group, warned that many manufacturers did not know who their high risk suppliers were or where the cracks and loose chinks were in their supply chains.

“With the current volatility of geopolitical, economic and financial markets, businesses need to research their risk areas and mitigate where they can in areas such as lifecycles, demand planning and skill shortages.”

The report gives an example of how global supply chains were thrown into turmoil following the Japanese earthquake.

“Xirallic, a popular pigment which gives cars a pearly shine, was manufactured at just one factory in the world, the Onahama plant near the Fukushima-Daiichi nuclear power station in Japan. The plant had to close causing some car makers to slow production or halt completely but is now back on track for recovery, highlighting the need for the industry to have a radical re-think about current business strategies.”

The report goes to argue that the financial stability of suppliers will be one crucial factor affecting the industry, pointing out that if interest rates rise, it will be much tougher for businesses to service loans.

And it stresses that collaboration between customers and suppliers externally needs to be matched with culture change internally. As well as addressing shortages in science, technology, engineering and mathematics, businesses will need to build new, stronger workforces that can work together as a team and collaborate right across a supply chain.


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