California Manufacturers & Technology Association - 2019 Guide - 24

by Roland Guillen - Partner
Warren G. Bender Co.


hile lean manufacturing has become a cornerstone of successful supply chain management
and a way for manufacturers to stay responsive
to changes in their markets, the dependence on suppliers
resulting from outsourcing and minimizing stock creates a
host of exposures for manufacturers.
Successfully navigating and managing the risks presented by a convoluted supply chain that spans across
regional, national and international markets could be a
complicated endeavor considering the countless factors
that can cause disruptions or liability issues across the
entire supply chain.
A survey of over 500 companies from 68 countries
across 14 different industry sectors conducted by the
U.K. Business Continuity Institute found:
65% of respondents experienced at least one
supply chain disruption
44% of these disruptions occurred with tier 1
Loss of productivity was the most common
consequence of supply chain disruption

Risk Factors Abound

A key supplier or buyer can be debilitated for a number
of reasons such as natural (floods, pandemics, earthquakes, severe storms), human (terrorism, civil disorder,
electronic security breaches) or technical (power failure,



California Manufacturers

hardware or software viruses). These events can have
dramatic effects on supply chain partners both upstream
and downstream. A single disruptive event in any part of
the world could initiate a customer service nightmare in
the United States.
And disruptions are more common than one might
imagine. The survey by the U.K. Business Continuity
Institute revealed that 73 percent of respondents had experienced a supply chain disruption in the last 12 months,
not only affecting top and bottom lines but also damaging
their brands and relinquishing market share.
Potential effects of supply chain disruptions include a
variety of potential negative consequences:
Reduced market share
Loss of customers
Damage to image, reputation or brand
Higher cost of capital
Potential breach of contract
Failure to meet legal or regulatory
Decrease in sales and increase in costs, from
which many companies never recover

Considering Your Liability

Worse, companies can be held liable for their supply
chain partners' mistakes. A defective or inherently dangerous product or part can cause liability issues for its
designer, off-shore manufacturer, shipper, wholesale distributor, retail seller and installer, who are collaboratively

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