You need to manage supply chain risk

In September, AFL supplier Sherrin pulled all football manufacturing from its Indian subcontractors after it admitted some balls were made using child labour. Photo: Justin McManus

An Apple contractor uses 14-year-old students to make iPhones. Estee Lauder sues Australian retailer Target for allegedly stocking counterfeit MAC cosmetics. Football maker Sherrin imports balls sewn by children as young as 10 in India. Recent news shows supply chain issues must be urgent for chief executives, says the Chartered Institute of Purchasing & Supply’s chief executive David Noble.

More outsourcing than ever means that on average companies pay third parties for 71 per cent of all their costs, CIPS estimates. In an age when anyone can set up as a trader, this greater complexity only makes it harder for companies to keep on top of where and how their product is supplied, UK-based Noble says.

“Going down five or six tiers, you’ve got no idea who’s actually making the product unless you’ve got the most stringent supply chain contingency plans and mitigation plans which avoid that problem happening,” he says.

It is both embarrassing and fortuitous for iPhone maker Apple that chief executive Tim Cook was the company’s supply chain operations head in his former role as chief operating officer. The “supply chain guru”, as Noble describes him, faces the task of not only sorting out Apple’s problems with manufacturing contractor Foxconn Technology but also of improving the company’s supply chain so that it becomes a fast and cheap one that confers a competitive advantage by holding rivals out.

“They’ve led the world in innovation and they hope to go on doing so but they know that can’t last forever,” says Noble, whose organisation certified supply chains for the London Olympics this year. “Apple don’t want to become a commodity product, therefore they know that superior execution is the barrier to anyone coming in.” Noble adds that he knows of many examples where a company’s reputation has not recovered from a major supply chain failure because shareholders lost confidence.

• Tweet