Manufacturers take supplier risks as Brexit uncertainty continues

Dec 15, 2019

THE ONGOING uncertainty around Brexit is encouraging many manufacturers and retailers to consider new supplier locations in low-cost, higher-risk countries to avoid possible trade barriers, says a new report.

The latest analysis in the Global Supply Chain Risk Report by Cranfield University and Dun & Bradstreet, found increases in supplier criticality and global sourcing risk in the third quarter of last year.

Lack of clarity over possible trade tariffs and other non-tariff barriers such as quotas, embargoes, sanctions and levies is persuading companies to seek alternative countries from which to source, said Cranfield-based academic Dr Heather Skipworth.

“The manufacturing sector in Europe is facing the ongoing uncertainty around Brexit, encouraging many businesses to take more risks with the location of suppliers. This is likely to increase their perceived criticality of and dependency on suppliers as choices become more constrained.”

Dr Skipworth, associate professor in logistics, procurement and supply chain management at Cranfield University, said that China is no longer attractive as a source of low-cost manufacturing due to rising wages. Companies are now looking at alternative higher risk countries such as India, Bangladesh, Vietnam and Romania.

Manufacturing experienced significant increases of between two and ten per cent across the four risk areas analysed in the report: supplier criticality, financial risk, global sourcing and foreign exchange risk.

Chris Laws, head of UK product and strategy at Dun & Bradstreet, said: “2019 has been a challenging year. The good news is that having full visibility of supply chain relationships and working with a more diverse range of suppliers across multiple locations can help to identify and mitigate reputational and operational risk.”

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