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Sum of the parts

Richard Milne
Financial Times
17 November 2008

Summary

The FT reports that, according to an industry insider, retail suppliers have complained in recent days that another large supermarket group has just asked for 15 per cent price cuts:

Manufacturing supply chains that went global over the past decade suddenly look vulnerable

'Julie Metelko, a business improvement specialist at PA Consulting, says that this approach risks backfiring on large companies: "If suppliers aren't getting cash, then you risk taking them out."

Manufacturers are also looking closely at their risk exposure in the supply chain:

'Counterparty risk is well-known in the financial world, where it refers to the chance one side of an agreement will default. As it becomes a concept to be reckoned with in the real economy, manufacturers are checking their exposure. "We have got to look at risk in the supply chain much more closely. Is your Chinese supplier financially sound? Are they capable of maintaining your supply?" asks Tim Lawrence, a supply chain expert at PA Consulting.'

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