Manufacturers and Retailers Fear the Recovery

September 30, 2009 - A quarterly risk report from AMR Research found executives are more worried about the economic recovery than a continued recession in 2010. In fact, 44 percent of respondents believe the recovery cycle is the biggest risk in 2010 because of potential commodity price increases, limited internal skills after workforce reductions, and problems meeting new demand with constrained capacity, low inventory and transportation constraints. On the other hand, only 23 percent of respondents are worried that the recession will continue, resulting in weak customer demand.

 

"Even as the economy begins to recover, the impact of the recession on manufacturers and retailers will be long-lasting," says Noha Tohamy, vice president of research at AMR Research. "Global supply chains will continue to face major risks in 2010 and beyond. As such, designing a supply chain risk management strategy is still crucial."

 

Respondents to the quarterly survey of U.S.-based manufacturers and retailers also identified the top supply chain risks, where and why they source and manufacture, and how they mitigate risks. Here is a sampling of those findings:

 

- The top three risks this quarter are: supplier product quality failures (31 percent); commodity price volatility (30 percent); and IP infringement (30 percent)

- Though piracy made the news in the first half of 2009, only 2 percent of companies are worried about its impact on business.

- A whopping 12 percent of manufacturers indicated that more than half of their suppliers have experienced disruptions that impacted their ability to serve them.

 

Sourcing and Manufacturing:

-44 percent of companies source from and manufacture in the United States and 15 percent source from and manufacture in China.

- Companies are continuing to look nearshore for sourcing and manufacturing (11 percent of respondents), with four times as many respondents planning to increase activity versus decrease.

- Respondents cited the United States (33 percent), China (26 percent) and Latin America (14 percent) as contributing the most risk to their supply chains. This is attributed to the volume of activity as well as inherent risks.China contributes the most risk in 11 out of 15 categories, while the United States contributes the most risk in three.

 

Mitigation Strategies:

- Supplier management is the most successful technology used to mitigate risk (23 percent report so), with inventory optimization (17 percent) and sales and operations planning tools (17 percent) following.

- Over the past year, using nearshore regions for sourcing/manufacturing has been the fastest growing mitigation strategy; 38 percent of respondents say an increase in cost competitiveness is behind this shift.

 

Please visit www.amrresearch.com for a summary of the supply chain risk report.