Global supply chains have become increasingly complex, and supply chain risk management (“SCRM”) is a major issue for most large corporates.
Globalization of trade flows means that SCRM increasingly features in trans-national trade discussions. For example, a key issue in the current Brexit negotiations is the complexity of the supply chain across the UK and Continental Europe; some larger product sub-assemblies contain components which have repeatedly crossed borders during the manufacturing process. This is one of the main reasons that the EU is keen for the UK to stay within the Customs Union.
The development of “Just-in-Time” production processes began in the 1980s; it has squeezed working capital costs to a minimum and reduced the risk of overstocking. Supply chains are leaner and more agile as a result, but they are also potentially longer and more fragile.
This paper looks at some of the largest global corporations and uses bank-sourced data to assess the level and distribution of credit risks across their supply chains.