Question

Please criticize report Six key trends impacting global supply chains in by KPMG 2022 whether you agree or not agree by provide support reasons. 20 marks

3. Overreliance on a limited number of third parties
Despite the inherent risk associated with focusing on 'one major trading partner', many businesses have strong relationships with just one major supplier, one large customer (or export market) and/or one major supply chain partner. As we emerge from the COVID-19 slowdown, many businesses recognise the need to better equip their supply chains by identifying alternative trading partnerships. They are actively seeking a broader list of suppliers, alternative markets/customers and alternative transport and logistics providers. Supply chain leaders are also turning the attention of their organisations to third- and fourth-party risk monitoring to address inherent and residual risks in near-real time and cyber and counterfeiting risks.
Businesses can build greater agility and resilience into their supply chains by working with providers who provide new capabilities as a service. New technologies, such as trading systems, planning and analytics capabilities, as well as additional logistics requirements provide variable cost solutions rather than long-term fixed overheads, enabling increased flexibility and better cost
control. The outcomes can create a stronger, more diversified supply chain with greater potential for risk and cost mitigation in the future.

Answer 1

Step-by-step explanation:

I agree with the report's observation that overreliance on a limited number of third parties can pose risks to supply chains. Here are the reasons supporting this agreement:

1. Vulnerability to Disruption: Relying heavily on a single supplier, customer, or partner increases the vulnerability of a business to disruptions. Any issues or disruptions experienced by that one major trading partner can have a cascading effect on the entire supply chain, leading to delays, shortages, and financial losses.

2. Lack of Negotiating Power: When a business depends on a limited number of third parties, it may have limited negotiating power. This can result in unfavorable terms, higher prices, or reduced flexibility in meeting changing demands. Having a broader list of suppliers, customers, and partners allows for more competition and better negotiation leverage, leading to improved terms and conditions.

3. Innovation and New Opportunities: Collaborating with a diverse range of suppliers, customers, and partners can bring fresh perspectives, ideas, and innovations to the supply chain. By exploring alternative trading partnerships, businesses can tap into new markets, access new technologies, and discover untapped opportunities for growth and expansion.

4. Risk Mitigation: Diversifying the supply chain reduces the concentration risk associated with relying on a limited number of third parties. It helps to spread risks across multiple sources, thereby mitigating the impact of disruptions, market fluctuations, or sudden changes in demand. This can enhance the resilience and continuity of the supply chain.

To address these challenges, businesses should actively seek alternative trading partnerships, establish relationships with multiple suppliers and customers, and explore partnerships with logistics providers who offer variable cost solutions. This approach enhances agility, flexibility, and cost control in the supply chain, creating a stronger and more diversified network that can better handle future risks and uncertainties.

Overall, by acknowledging the risks of overreliance on a limited number of third parties and taking proactive steps to diversify and strengthen the supply chain, businesses can enhance their resilience and competitiveness in the dynamic global market.