NU Online News Service, Dec. 5, 1:53 p.m. EST
After the March 11 earthquake and tsunami in Japan, major companies are beginning to examine risk-management strategies for their supply chains in China, as that country is exposed to many of the same natural-catastrophe risks as Japan and is a larger supply-chain hub for many companies, according to a new FM Global study.
Based on a survey of 100 financial executives from large global North America-based corporations with over $1 billion in sales, FM global found that 86 percent of respondents are reliant on China as part of their supply chain for key product lines compared to Japan. Forty-six percent were reliant on Japan.
Ninety-four percent of respondents say they are concerned about natural disaster-related disruptions to their supply chains in China. Before the Japan earthquake, 61 percent said they were “somewhat” to “extremely” concerned about supply-chain disruptions in China.
FM Global says, “The increased supply-chain risk exposure in China underscores the need to look at supply-chain resiliency beyond just certain risk-management tactics and geography. It should be more fundamental and strategic.”
The study recommends that organizations:
- Examine how they can mitigate risk within their products and processes.
- Assess how well they collaborate with suppliers to mitigate risk.
- Have appropriate business-continuity and disaster-recovery plans for supply-chain disruptions in emerging markets such as China.
FM Global notes that China has not yet fully embraced many of the risk-management practices seen in Western nations.
According to the survey, 61 percent of companies are considering implementing a more robust risk-assessment process to mitigate the impact of a natural-disaster disruption in China. Additionally, 65 percent are considering increasing collaboration with suppliers on mitigating risk at their locations and 70 percent of companies reliant on china for their supply chain are considering “increasing alternative sourcing” to mitigate the hazard.
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