Globalization has radically changed supply chain practices in a number of ways, but the transformation has added even more risks to an already very long list of what can go wrong. Among the potential problems stemming from globalization are more supply chain disruptions among lower-tier suppliers.Suppliers are now often dispersed around the world in different time zones and continents. This makes assessing and monitoring suppliers and then putting out fires in the supply chain when they happen that much more difficult.
The process might typically involve identifying and monitoring more logistic hubs such as airports and ports; potential choke points, such as the Suez Canal and Kiel Canal; and inventory in warehouses and distribution centers that can be in remote locations anywhere in the world.
Quantifying the risk
Meanwhile, sub-tier 1 suppliers remain the weakest link. According to a Riskmethods report, suppliers further downstream than tier 1 providers are the source of over half of all supply chain disruptions. Among those surveyed in the study, 51% of disruptions originated from tier 2 and lower suppliers, which represented an increase of 9% compared to 2013. Overall, the percent of supply chain disruption incidents increased to 81 % in 2014, compared to the average of 78.6% since 2010.But as they respond to these heightened risks, electronics buyers quickly realize the difficulties inherent in more closely monitoring their supplier base to mitigate the risks, especially among their sub-tier 1 supplier base."Unfortunately, 75% of most companies have no transparency in the sub-structures of their supply chains. An obvious reason is the high degree of manual effort required to identify the current situation and the current changes in the second-tier and lower supply chains, and to incorporate these into risk monitoring," Schwarz said.
