Wednesday 13th Dec 2017 - Logistics Manager

Concentration is not always a good thing

There is so much talk about supply chain risk these days that you would expect major corporations to have well worked out road maps to avoid the obvious pitfalls.

But, according to Resilinc, the US risk management specialist, what is actually happening is that leading global supply chains have become dependent on the same small group of sub-tier suppliers.

As a result, risk is being concentrated increasing the potential for crippling supply chain disruptions.

And, it says, they are not even aware that this is happening because this sub-tier supplier concentration is occurring deeper in their global supply chains.

Resilinc’s findings are based on supply chain mapping data from hundreds of suppliers across thousands of supplier sites spread over 50 countries.

The study focused on the high-tech and automotive industries, but many of the sub-tier suppliers analysed also support other global industries.

In fact, it found that in the high-tech and automotive supply chain, a vast majority of suppliers are dependent on sites that are owned by just four suppliers: Taiwan Semiconductor (TSMC), Amkor Technology, ASE and United Microelectronics (UMC).

The past few years have thrown up plenty of examples of disruption caused by problems at a single supplier. A year ago, a fire at Evonik’s CDT plant in Germany highlighted this problem. The plant was one of the largest suppliers of plastics used in the motor industry, so the fire caused an industry-wide problem.

Clearly, there is a balance to be maintained between resilience and cost. The evidence is that this balance needs to be reassessed.