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Out of sight, out of mind?

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So, for the want of some prawn risottos, BA has lost £30M and counting, according to a handy article I have here from the Observer.

It is August holiday season so quite a few of you may have been - or know someone - affected by the Gate Gourmet catering dispute that ultimately shut down BA's Heathrow flights last week.

As a lesson in supply chain management the BA debacle is not good. As an example of how easy it is to overlook issues of strategic risk when your focus is all on outsourcing activities at the keenest prices it is classic. Both should be giving all levels of the construction industry pause for thought.

The lack of lemon muffin tea trays or full English breakfasts for passengers is a problem specific to BA, or at least to airlines.

But major losses at a key supplier or crass handling of staff which could lead to damaging industrial disputes is definitely not.

How many clients or companies with their own supply chains know the ins and outs of profi and loss at their suppliers- How many push for cost savings from competing companies while outsourcing without really knowing that they are sustainable- How many are content to wash their hands of responsibility for adequate pay and conditions for people because that has been passed on down the supply chain, meaning it is out of sight, out of mind?

How many really know the true impact on their business of a key supplier going into meltdown- And how many have contingency plans in place?

The focus tends to be on the immediate bottom line rather than the strategic big picture, and it is starting to cause concern in the construction world.

utgoing Ofwat regulation cost director Bill Emery warns the water industry this week that squeezing suppliers' margins too hard is going to create problems for recruitment and training. This could leave the sector under-resourced and inadequately skilled in the future, with knock-on effects on water company performance and profits (see News page 8).

A report for the ICE on understanding of strategic risk among engineering firms has highlighted the fact that if you get it, your business does well, but if you don't - and that's the majority - then you need to start worrying now (see ICE news, page 36).

And redit rating company Standard & Poor's is reassessing the risk laid off onto contractors and subcontractors involved in PFI schemes. It fears that it is rather too much and any failure at the lower end of the supply chain could lead to the collapse of an entire project (News again).

If BA's problems prompt those at the top of construction supply chain to take more care of those further down then it will be all to the good. Anyone dismissing the queues at the airport as not relevant could instead take note that the judge's summing up in the Hatfi eld trial - the accident that brought down Railtrack - is expected to start next week.

Jackie Whitelaw is managing editor of NCE

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