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Top 25 Risk Factors for Manufacturing Supply Chains

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According to a recent report from BDO USA, an accounting and consulting organization, manufacturers’ intellectual property, supply chain data and products have become prime targets for cyber criminals.

The 2016 BDO Manufacturing RiskFactor Report examines the risk factors in the most recent 10-K filings of the largest 100 publicly traded U.S. manufacturers across five sectors including fabricated metal, food processing, machinery, plastics and rubber, and transportation equipment.

The factors were analyzed and ranked by order of frequency cited.

Manufacturing Industry Serves Up New Risks

The manufacturing industry is getting mixed reviews.

The Institute for Supply Management (ISM) Index reported that activity was up in April after five straight months of declines.

Then, in late May, the Purchasing Manager’s Index reported the first reduction in output since September 2009.

In the trenches, manufacturers say domestic demand has been solid, while global business has been more challenging. And the end customer matters: in a recent earnings call, Caterpillar’s CEO noted, “Just about any market that’s away from oil is doing pretty good.”

“Pretty good” is a modest but realistic goal for manufacturers this year, and their top concerns echo this cautious optimism. The annual analysis of the most frequently cited risk factors found the supply chain remains at the top of the list – cited by 100 percent of manufacturers we analyzed – while emerging and growing risks in cybersecurity, competition, labor, pricing, regulations and international operations are also keeping manufacturers up at night.

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Sustainability Drives Supply Chain Professionals to Learn New Finance and Accounting Concepts

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At JDA’s Focus event, Rich Beck, the Sr. Vice President of Global Operations at PepsiCo, gave the keynote on the second day of the conference. Rich said that their supply chain goals included “digitizing the value chain” (JDA was a key solution provider in this area) and “sustainability.”

I’ve been covering supply chain management for twenty years. Last year, I spent 20 percent of my time on the road. And I hear many, many supply chain speeches. I can count on a few fingers of one hand the number of supply chain executives I have heard say sustainability was one of their major goals.

That will change. 72% of the companies included in The S&P 500 Index® publish sustainability reports, up from just under 20% in 2011. Over time, companies’ sustainability efforts become more mature and corporate sustainability goals filter down and become key supply chain goals as well. And these are not incompatible goals. At PepsiCo supply chain sustainability includes “reducing their inputs while optimizing outputs;” but really, that has always have been a goal for supply chain organizations.

The CDP, formerly the Carbon Disclosure Project, is the best known of the organizations that are helping (or pressuring, depending on your point of view), companies to do better. Thousands of companies work with the CDP to measure, disclose, manage and share environmental information.

The CDP scores companies on their performance. “A high performance score signals that a company is measuring, verifying and managing its carbon footprint, for example by setting and meeting carbon reduction targets and implementing programs to reduce emissions in both its direct operations and (the extended) supply chain.” Companies score higher if they are focused not just on internal emissions, but the emissions caused in their extended value chain. This causes a ripple effect as big companies with sustainability goals request their suppliers to also reduce their emissions.

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What is your opinion towards “sustainability”? Do you think it is a priority? Share your thoughts with us in the comment box below.