What follows is an excerpt from the Report “Managing the Biggest Supply Chain Risk of All: Constant Change,” available to AMR Research clients that subscribe to the Supply Chain Planning and Execution Service. Global companies are struggling to understand and mitigate risks across their extended supply chains in arguably some of the worst economic conditions of modern times. Their goal is to fulfill increasingly shrinking demand profitably during this downturn cycle and be well positioned for the next growth cycle. Companies are also revisiting their manufacturing and sourcing decisions to create a more balanced portfolio of low-cost and low-risk regions. AMR Research regularly surveys global companies to measure the levels of risk in their global supply chains, gauge the regions that contribute the most significant risks, and analyze the impact of these risks on how they manage their business. In the most recent survey, conducted in October 2008, we asked 130 global companies about the risks that they face in their supply chains. To measure the trends in supply chain risk management, we compare these findings against previous surveys and to the respondent perceptions of these levels of risks from one year ago and for next year. Whiplashing energy, commodity, and transportation costs wreak havoc even on the best-run supply chain Volatile fuel, energy, and commodity prices rank as the top three risks of our respondents. It has been breathtaking to witness the dizzying decline in the prices of oil this summer. Oil prices reached record highs in July, at around $150 barrel, before reaching sub-$50 a barrel in November. 
When fuel and energy prices skyrocketed, many companies questioned much of their globalization assumptions: chasing low material and labor costs in countries like China with little concern about the cost of transporting raw materials, components, and ultimately finished costs to and from these countries. Rising transportation and energy costs validated recent trends to investigate nearshoring and onshoring options, where higher labor costs in near regions like Mexico or Eastern and Central Europe were offset by the savings in the price of fuel. Overall rising energy prices also gave momentum to the quest for alternative fuel sources and cleaner energy. Chinastill contributes the most risk to global supply chains When asked what country or region contributes the most risk to their supply chains, respondents overwhelmingly chose China as the top contributing region for 9 of the 15 risks, including intellectual property infringement, supplier and internal product quality failure, and security breaches. This creates a dilemma for many global companies that, on one hand continue to enjoy the advantages of cheaper material costs and labor wages in China as well as the potential to reach vast consumer markets, but on the other must continually reassess the pros and cons of operating in China. 
The United States is the top contributing region for 5 out of 15 risks, including energy and commodity price increases and volatility, and lower consumer spending. Finally, India was the top contributing region when it came to immature logistics infrastructure. For more information about AMR Research’s Supply Chain Planning and Execution Service or about becoming a client, contact info@amrresearch.com.
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