SHORT HILLS, N.J., Feb. 14, 2017 /PRNewswire/ -- Global supply chain
risk grew to a record high at the end of 2016 as the CIPS Risk
Index, powered by Dun & Bradstreet, rose to 82.64, from 79.14
at the end of 2015. The figures put global supply chain risk at the
highest level in 24 years following a year in which the pace of
globalisation appeared to slow.
The Index, produced for the Chartered Institute of Procurement
& Supply (CIPS) by Dun & Bradstreet economists, tracks the
impact of economic and political developments on the stability of
global supply chains. A combination of economic nationalism,
rebounding commodity prices and the growth of a burgeoning Chinese
middle class is making long international supply chains a more
risky prospect while there has been an average of 22 new trade
restrictive measures a month in the World Trade Organisation's
latest report.
The upward trend in supply chain risk is clearest in
Western Europe, where
contribution to global risk rose to 30.681 in Q4 from 30.048 in Q1.
Amid sluggish growth across developed and emerging market economies
in Q2, the UK's vote to leave the EU at the end of June heightened
global supply chain risk for the rest of the year. Supply chains in
the UK were severely hit by a depressed pound which followed the
Brexit vote in June. This pushed up the cost of imports, leading to
some early conflicts in Q3 between retailers and their suppliers
over who should shoulder these costs. The increasing likelihood of
a 'hard' Brexit, and the UK's departure from the single market,
will add further disruption to supply chains throughout
Europe.
In addition to the UK's vote to leave the EU, there has been a
wider revival of interest in trade restrictive measures across
Europe. Elections across
Europe in 2017 are expected to see
gains for populist parties with France's National Front, Italy's Five Star Movement, the Freedom Party
in the Netherlands and the German
Alternative for Germany all
placing Euroscepticism and restrictive trade measures at the centre
of their policies.
At a global level, Donald Trump's
election success in November confirmed a wider shift towards
protectionism in global trade policy. The adoption of protectionist
trade policies, closing of borders and pursuit of bilateral trade
deals over multilateral ones, all signal that the gap is widening
between an interdependent global economy and the sole pursuit of
national interests. As multilateral trade agreements such as the
Trans-Pacific Partnership are dismantled, global supply chains face
unparalleled uncertainty and stress.
North America's
contribution to global risk remained static over 2016 as the North
American economy continued on a trajectory of growth and US
consumer spending remained strong. This risk score is likely to
increase in 2017 if the USA builds
trade barriers with Mexico and
China who are significant players
in the global manufacturing supply chain network.
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
Global Risk
score
|
79.81
|
80.83
|
81.60
|
82.64
|
Western
Europe
|
30.048
|
30.287
|
30.551
|
30.681
|
North
America
|
8.125
|
8.152
|
8.123
|
8.084
|
Asia
Pacific
|
33.566
|
33.349
|
33.148
|
33.168
|
Sub-Saharan
Africa
|
3.095
|
3.090
|
3.087
|
3.072
|
Eastern Europe and
Central Asia
|
8.516
|
8.475
|
8.489
|
8.470
|
Middle East and
North Africa
|
9.088
|
9.117
|
9.097
|
9.053
|
Latin
America
|
7.561
|
7.529
|
7.506
|
7.473
|
Fig 1.
Contribution to global risk
|
Asia Pacific remained
the highest contributor to supply chain risk in 2016 due to the
region's importance to global supply chains. Asia Pacific's contribution to global risk
fluctuated between 33.566 in Q1 to 33.168 in Q4. The emergence of a
larger middle class in China has
gradually reduced the competitiveness of Chinese exports in 2016
with wages increasing by 10%. As a result, suppliers have begun
moving their supply chains into nearby Indonesia or even beginning the process of
reshoring back into their domestic markets. Going forward, the
rising tide of global protectionism poses a considerable threat to
supply chains relying on Chinese exports with the yuan falling to
an eight-year low against the US dollar in the week of Donald Trump's election.
Elsewhere, the impact of rising oil costs in Q4 has driven up
the costs of other commodities. 2016 saw a trend of persistently
low commodity prices disrupted when OPEC restricted supply, pushing
oil prices up by $10 per barrel in
Q4. This worsened the cash flow crisis for oil exporters in
Eastern Europe and Central Asia, the Middle East, North Africa and Sub-Saharan
Africa. This increase in transport costs is encouraging
businesses to have shorter supply chains although it remains to be
seen how long the new agreement will hold. Contribution to global
risk in the Middle East and
North Africa increased from
9.08 at the beginning of the year to 9.09 in Q3.
John Glen, CIPS Economist
and Director of the Centre for Customised Executive
Development at The Cranfield School of Management
said:
"The UK's decision to leave the European Union and the
election of Donald Trump reflect a
growing trend of protectionism in the global economy. For this
reason alone, supply chain risk is set to increase further in
2017.
"Amidst exchange and commodity volatility, currency hedging
will remain vital, while contingency plans must be put in place to
protect supply chains from foreseeable trade barriers. Re-shoring
supply chains will be an increasingly attractive prospect in the
months to come. But, these are uncertain times for supply chain
managers and there is no quick fix for the months ahead.
"It is more important than ever for supply chain managers to
listen to their suppliers, develop closer relationships with them
and to monitor any changes, so they can react quickly and ensure
their supply chains remain resilient."
Bodhi Ganguli, Lead Economist,
Dun & Bradstreet:
"Dun & Bradstreet's Global Risk Score measuring supply
chain risk rose to an all-time high in Q4 2016, reflecting a rise
in political and economic risk.
"Uncertainty stemming from significant trade and foreign
policy changes implemented by the new US government will be one of
the main drivers of supply chain risk over the next few quarters.
The process of Brexit is also set to start in Q1, and will roil the
current supply chain environment in Europe. Emerging markets dependent on trade
will also be affected by both these factors and commodity price
fluctuations remain an ever-present threat to global supply
chains."
Notes to Editors:
About the CIPS Risk Index, powered by Dun &
Bradstreet:
First launched in April 2014, the
CIPS Risk Index, powered by Dun & Bradstreet, is a composite
indicator of pressures acting upon supply chains globally. The
Index analyses the socio-economic, physical trade and business
continuity factors contributing to supply chain risk across the
world, weighting each score according to that country's
contribution to global exports.
The Index helps sourcing professionals understand the risks to
which their supply chains are exposed, articulate questions and
scenarios for key suppliers, inform assurance activities, check the
readiness of contingency plans, support the negotiation of risk
transfer in contracts, and establish factors which may impact the
financial stability of tier one and sub-tier suppliers
upstream. Regular production of this Index will help
procurement and supply professionals communicate and justify
risk-informed sourcing decisions and support effective Supplier
Relationship Management.
About the Chartered Institute of Procurement &
Supply:
The Chartered Institute of Procurement & Supply (CIPS) is
the leading international body representing purchasing and supply
management professionals. It is the worldwide centre of
excellence on purchasing and supply management issues. CIPS
has a global community of 115,000 in 150 different countries,
including senior business people, high-ranking civil servants and
leading academics. The activities of purchasing and supply
chain professionals have a major impact on the profitability and
efficiency of all types of organisation and CIPS offers corporate
solutions packages to improve business profitability.
www.cips.org, @CIPSnews.
About Dun & Bradstreet:
Dun & Bradstreet (NYSE: DNB) grows the most valuable
relationships in business. By uncovering truth and meaning from
data, we connect our customers with the prospects, suppliers,
clients and partners that matter most, and have since 1841. Nearly
ninety percent of the Fortune 500, and companies of every size
around the world, rely on our data, insights and analytics. For
more about Dun & Bradstreet, visit DNB.com.
Contacts:
Deborah McBride
Dun & Bradstreet
(973) 921-5714
mcbrided@dnb.com
Investors -
Kathy Guinnessey
Dun& Bradstreet
973-921-5892
Kathy.Guinnessey@dnb.com
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SOURCE Dun & Bradstreet