Manufacturers urged to bolster inventories as supply chain disruption mounts

Latest global supply chain resilience report indicates further decline is expected, with purchasing teams challenged to mitigate a growing number of risks

Key findings:

• Further reduction in supply chain resilience score to 39.8 in Q1 2022
• ASCR Index has now fallen under the 40-point high-risk threshold, with further decline expected
• Damage to Ukrainian manufacturing bases and extended sanctions on Russia expected to prolong stifled trade flows from Europe
• Risks to supply of critical commodities such as oil starting to compound each other in an ‘inflationary feedback loop’
• Economic growth is being undermined by a jump in inflation

Manufacturers across a variety of sectors are being urged to consider fattening their inventories as quickly as possible in order to mitigate a prolonged disruption to global supply chains.

The advice comes from supply chain risk and performance management specialist, Achilles, whose latest report on the resilience of global supply chains, indicates high risks are evident across almost all sectors and geographies.

The Q2 Achilles Supply Chain Resilience Index (ASCRI) now indicates a score of 39.8 – the first time the figure has fallen below its 40-point high-risk threshold, with further declines in resilience expected.

Anticipation of a protracted war in Ukraine and the re-emergence of COVID in China bringing about further logistical challenges have led to a desperate need for procurement professionals to mitigate the potential impact of supply losses over the months to come.

Where possible, bringing the next order forward can help manufacturers to potentially afford themselves one extra stock cycle and the time to find alternatives if supply is lost.

While many will be concerned about the cost of an extra stock cycle in the short term, the cost premium is still expected to be less than that caused by large-scale stockouts.

Katie Tamblin, Chief Product Officer at Achilles, said: “Procurement professionals work tirelessly to plan contingencies should supply chain disruption arise, but what happens when there are so many risks that some become unavoidable? With the prolonged conflict in Ukraine and extremely tight restrictions on movement in China at present, the prospect of further disruption and even higher costs seem almost inevitable. It would be wise for manufacturers to consider acting now to mitigate even greater risks months down the line. By bringing planned orders forward as much as possible, that extra stock cycle and the extra planning time it brings, could prove to be an invaluable way to find alternative sources of supply.”

The ASCRI is a time series index measuring changes in supply chain risk. The index measures underlying supply chain risk by country across six categories: Economic, Environmental, Labour Practices, Legal and Governance, Resilience, and Safety and Security. Each country’s score is derived by combining the Achilles’ Scores of suppliers based in the country with that country’s overall performance in those six categories. This framework is then supplemented by a range of global measures, including shipping and sentiment data. The Q2 Report uses data from January to March 2022.

To read the report, visit: www.achilles.com/industry-insights/ascri/