Supply Chain Digest editorial staff

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The News: A new “map” from Aon and Oxford Analytica concisely summarizes a variety of potential supply chain risks across the globe.

The Impact: Handy source for global supply chain and sourcing managers to understand economic, political and supply chain risk factors.

The Story: With the growth of the global supply chain comes a corresponding increase in risk from a variety of potential political, economic and supply chain disruptions. How is a supply chain or global sourcing manager to understand these risks across hundreds of countries and potential sourcing locations?

Insurance broker AON, in conjunction with consulting from Oxford Analytica, has just released a very handy and interesting summary of these risk factors country by country across the globe. The “Political and Economic Risk Map 2006” provides a concise view of the risk profiles across political and economic dimensions and the supply chain, and is a very handy reference tool for anyone making global supply chain decisions. This year’s effort is one in an annual series such annual reports produced by AON’s Trade Credit arm.

The map lists a number of the key recent global supply chain disruptions. These include:

• Argentina: Financial crisis caused supplier insolvency
• Canada: Canadian rail strike
• China: SARS outbreak
• EU: Blockage of Chinese textile imports
• Gulf of Aden: Terrorist attack on oil tanker
• Iraq: Iraq war
• Suez Canal: Tanker breakdown blocked canal
• Thailand, Sri Lanka and Indonesia: Asian tsunami
• U.S. Gulf of Mexico: Hurricane Katrina
• U.S. West Coast: Longshoreman strike

In terms of important potential threats, Aon and Oxford Analytica identify the following as of short-term concern:

• Bosporus Strait, Malacca Strait, Panama Canal & Suez Canal: Terrorist attacks or maritime piracy
• Brazil: Labor unrest and infrastructure failures
• China: Bird flu outbreak
• China: Financial crisis causing supplier insolvency
• India: Political instability
• South Korea: War on Korean peninsula
• Taiwan: China-Taiwan hostilities
• Washington, D.C. and London: Restrictions on outsourcing

The map, for example, cites such Asian countries as China, South Korea, the Philippines, Vietnam, Indonesia, India and Cambodia as having significant supply chain vulnerability in 2006, while Thailand, Singapore, and Malaysia do not.

When a variety of political and economic factors are added in, it becomes clear the world is still a very risky place in which to do business.

"Understanding the nature of supply chain risk exposures, and where they occur
most frequently, is now a board-level priority,” says Bryan Squibb, managing director, Aon Trade Credit.

Squibb notes, for example, the challenges faced in sourcing in Latin America, where in the U.S. the American Free Trade Agreement (CAFTA) and other factors have
enticed companies to look to Latin America for investment opportunities such as
textile manufacturing, while at the same time many countries in the region seem to have increased political risk.

Do companies adequately understand supply chain risk in making global sourcing decisions? Do you think the global supply chain is getting safer – or more risky? Let us know your thoughts?

Article key words: Global supply chain, global sourcing, supply chain risk