Risk within the foundation of Australian supply : a cross-sectoral, cross-regional perspective

Supplier capability and customer engagement trends have changed considerably in recent times. Once robust supply networks have been eroded and capacity reduced, OEM engagement patterns have changed that now often preclude existing suppliers in favour of new, alternative suppliers. In 2010 and 2011 a series of supply focus groups and key interviews with customers indicated that OME’s have typically focused attention on Tier 1 and Tier 2 supplier and lost visibility of lower level suppliers, by outsourcing the management and responsibility of the lower level suppliers to their Tier 1 and Tier 2 suppliers. The outsourcing of management and responsibility has created a significant disconnect and compounded risk in supply networks. Remarkably, this scenario is accepted as “best practice” under recognised supply management protocols. This paper discusses the findings of this research and the long term implications of the erosion of a critical mass of grass roots suppliers within Australia.