• 10% more buyer relationships in the first quarter were with suppliers located in high-risk countries than in the previous quarter.
  • Dependency on key suppliers increased 3%, marking a 10% increase in the past two quarters, with the retail sector scoring highest level of dependency at 75.2%.
Companies in the retail industry consider most of their buyer–supplier relationships to be with suppliers that are critical or key

Companies in the retail industry consider most of their buyer–supplier relationships to be with suppliers that are critical or key

The level of supply chain risk faced by European retail companies with international suppliers increased in the first quarter, a new report shows.

A joint report published today (12 June) by Cranfield School of Management and Dun & Bradstreet found 10% more buyer relationships in the first quarter were with suppliers located in high-risk countries than in the previous quarter.

Dependency on key suppliers increased 3%, marking a 10% increase in the past two quarters, with the retail sector scoring highest level of dependency at 75.2% – suggesting a trend towards partnership relations rather than transactional ones.

"This means that companies in the retail industry consider most of their buyer-supplier relationships to be with suppliers that are critical or key, indicating significant supplier dependency," the report explains. "Conversely, the manufacturing sector appears less dependent on individual suppliers, probably because companies tend to have a wider pool of suppliers."

The report uses four key metrics – supplier criticality, supplier financial risk, global sourcing risk, and foreign exchange risk – to assess overall supply chain risk.

Supplier financial risk, meanwhile, which refers to the percentage of buyer-supplier relationships where the supplier has a high or very high financial risk score, was highest in retail at 23.6%. This has increased by 3% throughout the quarter. Combined with a 4% increase in supplier criticality, this indicates a marked increase in exposure to risk.

The supplier criticality score represents the proportion of buyer-supplier relationships where the supplier is considered critical or key by the buyer company. Currently, this stands at 47.8% overall, compared to 46.4% at the beginning of the quarter.

"Supply chains are becoming longer, more fragmented and increasingly complex, increasing the level of risk exposure for businesses," says Dr Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield.

"Alongside natural disasters and geopolitical events like Brexit, there are also other – relatively low profile – events like fluctuations in exchange rates, changes to rules and regulations, or the bankruptcy of a key supplier that can impact organisations' supply chains."

Analysis was carried out using proprietary commercial data supplied by Dun & Bradstreet, which included around 600,000 anonymous transactions between European buyers and their suppliers located in around 150 countries globally.

Chris Laws, global product leader for supply and compliance at Dun & Bradstreet, adds: "Procurement teams can use data and analytics to more effectively manage supply chain risk and protect the reputation of their business. Having access to a single, comprehensive source of information on supply chain relationships can help businesses identify potential areas of exposure, take action to minimise any negative impact, and plan ahead to recover from events outside of their control."