Consider Supply Chain Risk When Deciding Where to Expand Globally

FM Global’s 2015 Resilience Index finds companies doing business in Norway face the fewest supply chain disruptions, while those in Venezuela face the most. The U.S. ranks in the top 25 countries (out of 130) as a country having fewer disruptions to the supply chain.

The Index divides the U.S. into three regions due to its geographic size, with each area facing its own set of natural challenges. The East coast (Region 1) faces wind hazards, while the West coast (Region 2) contends with earthquake risk and the Midwest (Region 3), although subject to tornadoes, is considered by FM Global to be the least exposed to natural hazards. Region 3 made the top 10 at 10th, while Regions 1 and 2 registered 16th and 21st, respectively.

The Index measures a country’s susceptibility to supply chain disruption and its ability to recover from this disturbance. FM Global identifies nine key drivers of resilience, including infrastructure, exposure to natural risk and political risk.

The stakes are high, and “business leaders who don’t evaluate countries and supply chain resilience can suffer long-term consequences,” says Bret Ahnell, executive vice President, Operations, FM Global. “If your supply chain fails, it can be difficult or impossible to get your market share, revenue and reputation back.”

A recent study by HMI and Deloitte finds companies plan to implement major changes to reduce their supply chain risk. Seventeen percent of firms participating in the analysis say they will invest more than $10 million in new technologies over the next two years.

The manufacturing industry provides a strong example of the need for a reliable supply chain. The government finds almost 60% of a manufactured product cost comes from value added by suppliers.

“Manufacturers must consider upgrading the tools they use to manage their supply chain because customer demand has never been greater than it is today,” Bob Farrell, CEO of supply chain software maker Kewill told Manufacturing.net. “Customers want deliveries faster and they must be accurate. Manufacturers that can’t compete with speedy, efficient deliveries will simply fall behind the competition.”

When we take a look at the world today, we consistently see wars, natural disasters and more. These external factors are bound to disrupt supply chain management. The ability of business leaders to evaluate a country’s risk and invest in supply chains are key to ensuring seamless supply-chain management.