Silo Mentality Puts Supply Chain at Risk, Says KPMG

July 05, 2012 /

UK organisations are leaving too much to chance and ignoring recent business disasters, in the mistaken belief that their supply chain is immune to failure. Too many organisations are also adopting a ‘one size fits all’ approach to their supply chain, meaning that critical stretch points are often missed, putting business at risk.

These are the views expressed by Richard Nixon, corporate advisory partner at KPMG, ahead of a conference exploring Supply Chain Maturity in the UK. He says:

“’It’ll never happen to me’ is a mantra that far too many executives still utter, but given the increasing regularity with which we hear of natural disasters affecting the supply chain, it’s a phrase said more in hope than expectation.

“For many organisations, supply chain complexity has reached unprecedented levels and they are struggling to cope. Globalisation combined with the demands of the ‘I want it now’ society mean that businesses are also increasingly reliant on third-party suppliers. They become so focused on delivery that counter-party risk is overlooked until it becomes too late.

“The biggest problem, though, is that departments look at risk within their own silos rather than across the business as whole. It may be true that there is still no home for supply chain risk, but until businesses evolve and mature to the point where this changes, it is critical that the Board gives clear responsibility to one function.

“Today, many organisations even fail to have tactical responses in place to help them react to issues and problems. The easy option is to focus on suppliers where there is a direct relationship, but risks further back in the supply chain cannot be ignored. The simple fact is that unless they are ‘owned’ by one part of the business, nothing will change.”

With 16,871 companies going into liquidation in the UK in 2011*, the consequences for customers in the supply chain can be huge. Against this backdrop, KPMG is advising organisations to take a step back from day-to-day operations and assess the supply chain risks they face, match these to the suppliers they use and ensure that reviews are ongoing.

Nixon concludes: “As much as the current economic climate means that cost reduction is critical to business survival, organisations that cut corners around the supply chain will continue to struggle. Leaving everything to chance, or relying on personal relationships, risks far too much – something most organisations can ill afford.”

 

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