If you are a frequent reader of this blog than you know all too well, about our constant reminders of having a robust supply chain risk mitigation plan in-place. Search on that very topic under Categories on the right-hand panel and you fill find over 280 Supply Chain Matters postings referring to various updates on this topic.
Last week, supply chain resiliency services provider Resilinc alertedSupply Chain Matters to recent findings from mapping exercisesconducted on a subset of supply chain sourcing data involving hundreds of suppliers across thousands of supplier sites spread among 50 countries. These findings, by our view, are indications that those manufacturers in certain industries have not done due-diligence regarding mitigation of potential supply chain risk.
The analysis specifically focused on sub-tiers of certain industry supply chains. Industries included involved high tech and automotive. Recall that during the 2011 severe earthquake and tsunami that struck Japan, and later that year the monsoon floods that devastated certain industrial parks in Thailand, many manufacturers discovered later the most significant supply disruptions occurring in these supply chain sub-tiers, often discovering that certain components were either sole-sourced, or that the vast majority of manufacturing capability for certain key components were concentrated in one specific geographic region. In most cases, these sub-tier suppliers lack full visibility from existing supply planning or S&OP processes of higher tiered manufacturers and OEM’s.
The summary of findings uncovered by Resilinc indicates that global supply chain risk continues to be concentrated in certain sub-tiers of industry supply chains. That should be of high concern for either Chief Supply Chain or Procurement Officers.
The most profound aspect of this study is that within certain automotive and high tech supply chains, Resilinc uncovered the fact that a vast majority of suppliers are dependent on component supply from just four semiconductor suppliers: Amkor, ASE, United Microelectronics (UMC) and Taiwan Semiconductor (TSMC). The surprise for some readers may be the new dependence that automobile manufacturers have on intelligent electronics in motor vehicles.
More than half of all sites are located in just four countries: China, Japan, Taiwan and the United States, as noted in the graphic provided by Resilinc:
What struck us is that certain sites within both Japan and Taiwan geographically lie in high earthquake-prone regions. China has had its share of recent major disasters and certain semiconductor manufacturing areas within the U.S. west-coast region either lie on well-known earthquake fault lines or have been impacted by recent unusual weather involving heavy rains, mudslides or severe drought and wild fires.
We recently called attention to how Apple was changing its semiconductor sourcing strategies to buffer the previous high dependency on Samsung Electronics, and now including TSMC for sourcing of important microprocessors. Samsung itself has sourced from other semiconductor suppliers.
Once again we state the obvious. Every supply chain management team needs to have a vibrant supply chain risk mitigation and management plans in-place. Evidence continues to point to yet more profound reminders to the ongoing existence of supply chain risk.