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Is Manufacturing At Risk From A Financial Timebomb?

Posted By Paul Tate, August 23, 2011 at 9:46 AM, in Category: Global Value Networks

Turbulent political and financial instabilities over the last year – from the Japanese earthquake to the effects of the Arab Spring – have highlighted numerous risks for manufacturing supply chains across the world.

In a new report called “Achieving excellence in production and supply," management consultants Price Waterhouse Coopers now believes global manufacturers must act urgently to protect and prepare their supply chain matrixes against what it calls “a ticking timebomb of financial instability” in the years ahead.

“Supply chains and the manufacturing industry have been on a rollercoaster ride, hit by skyrocketing prices of oil and commodities, high levels of debt, weak demand and tight credit,” argues PwC’s recently appointed head of its global Industrial Manufacturing group, Barry Misthal.

“The reality is many [manufacturing companies] do not know who their high risk suppliers are or where the cracks and loose chinks are in their supply chains. With the current volatility of geopolitical, economic and financial markets, businesses need to research their risk areas and mitigate where they can in areas such as lifecycles, demand planning and skill shortages,” adds Misthal.

The financial stability of suppliers will be one crucial factor affecting the industry, says the PwC report. If interest rates rise, it will be much tougher for businesses to service loans. Firms will also need to work on attracting the right employees, who can adapt their skills and be flexible.

The report stresses that collaboration between customers and external suppliers will need to be matched with internal cultural change. As well as focusing on basic skills shortages, businesses will also need to build new, stronger workforces that can work together as a team and collaborate right across a supply chain, says PwC.

In summary, the new report identifies five key areas for manufacturers to take heed of in today’s turbulent times - skills and talent, addressing lifecycle opportunities, linking demand planning with the rest of the supply chain, identifying and acting on supply chain risks, and stronger collaboration between suppliers and customers.

Are you already focusing on these strategic risk factors?

Is further financial instability keeping your supply chain planners awake at night?

What measures are you adopting to mitigate future risk for your manufacturing organization?

Written by Paul Tate

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive


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