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Supply chain risk is a key concern for manufacturers

Over a third (37 percent) of manufacturers in Europe are continuing to focus on the risk, reliability and flexibility in their supply chain – which remains one of their biggest challenges – according to KPMG’s 2012 Global Manufacturing Outlook: Fostering Growth through Innovation report.

The other major challenges facing manufacturers in Europe includes uncertainty of demand (45 percent), followed by price volatility of key cost input (37 percent) and intense competition and pressure on prices (37 percent).

Near shoring: an effective way to manage risk

The survey found that the growing trend for ‘near shoring’ manufacturing facilities closer to end markets was felt by the majority of respondents worldwide to be either an ‘effective’ (43 percent) or ‘highly effective’ (18 percent) way of improving risk management. In addition, just under half (46 percent) believe that the trend for near shoring will increase in the manufacturing sector over the next 12-24 months.

David Higginson, risk consulting director at KPMG said:

“Supply chain risk management continues to be a key issue at board level for manufacturing companies and this survey confirms that many see and are already using near-shoring as a strategy to manage aspects of that risk. However, in our experience, very few companies have a fully integrated supply chain risk management process addressing all elements of supply chain risk: supplier failure; continuity of supply; counterparty risk and regulatory risk.

“Regulatory risk in the supply chain is a key focus for many organizations in the manufacturing sector: with the implementation of the UK Bribery Act companies are focusing on the importance of assessing third parties for bribery and reputational risk.

“Other aspects of regulation will require an in depth understanding of the supply chain to manage risk eg identifying potential sanctions breaches; and the forthcoming disclosure requirements for SEC registrants for conflict minerals under the Dodd Frank Act.”

KPMG’s 2012 Global Manufacturing Outlook: Fostering Growth through Innovation surveyed 241 senior manufacturing executives in February 2012. Respondents represented the aerospace and defence, metals, engineering and industrial products sectors, including industrial conglomerates. Participants represented companies with more than US$1bn in annual revenue; 33 percent hail from organizations with more than US$10bn in revenue. The companies were geographically split among Western Europe (29 percent), North America (23 percent), Asia-Pacific (28 percent), Middle East and Africa (10 percent) and Latin America (10 percent).

•Date: 12th June 2012 • World •Type: Article • Topic: Enterprise risk management

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