Driving blindfold into a disaster

Driving blindfold into a disaster

Driving blindfold into a disaster

The FINANCIAL -- Ineffective management of supply chains is leaving organizations open to severe disruptions and the high financial costs incurred as a result.

Nearly one in ten organizations are not aware of who their key suppliers are, leaving them open to severe disruption as they are unable to manage their supply chain effectively. That is according to a report published on November 10 by the Business Continuity Institute and supported by Zurich Insurance Group.

The Supply Chain Resilience Report highlighted that seven in ten organizations admit to not having visibility over their full supply chain, and as the survey also revealed that half of disruptions occur beyond the preliminary, tier 1 supplier of goods, therefore making it extremely difficult to establish where an organization lies within its suppliers’ priorities.

This could have major consequences when it comes to managing the supply chain and ensuring that disruptions are minimized, which is particularly important given that the report also found that 74 percent of organizations had suffered at least one disruption during the previous twelve months and that 14 percent had suffered cumulative losses of at least EUR 1 million as a result.

Other findings of the report include:

Unplanned IT and telecommunications outage (64 percent), cyber attack and data breach (54 percent) and adverse weather (50 percent) are the top three causes of supply chain disruption. New entries to the top ten are: product quality incident (8th), business ethics incident (9th) and lack of credit (10th).

The top five consequences of disruption are loss of productivity (58 percent), customer complaints (40 percent), increased cost of working (39 percent), loss of revenue (38 percent) and impaired service outcomes (36 percent).

One third (33 percent) of respondents report high top management commitment to supply chain resilience, increasing from 29 percent last year.

About seven out of 10 respondents (68 percent) report having business continuity arrangements in place to deal with supply chain disruptions.

Nick Wildgoose, Global Supply Chain Product Leader at Zurich Insurance Group, commented: “Through our work with customers in this area, we have found that increasing visibility along supply chains and resilience are major sources of competitive advantage. Top management leadership is the key to overcoming silo thinking about supply chains within an organization.”

Patrick Alcantara DBCI, Senior Research Associate at the BCI and author of the report, commented: “Recent incidents have shown us how supply chain disruptions can have a negative impact on an organization’s bottom line, reputation and resilience. This year’s Supply Chain Resilience Report demonstrates how good practice can mitigate the worst effects of these disruptions. With findings consistently showing top management commitment as a key enabler of supply chain resilience, we encourage business leaders to take a closer look at their supply chains and champion good practice across their organizations.”

Now into its seventh year, the annual Supply Chain Resilience Report represents a long-standing working partnership between Zurich Insurance Group, BCI and CIPS (Chartered Institute of Purchasing and Supply). It is now an influential and ‘go-to’ industry resource that tracks the origins, causes and consequences of supply chain disruption across industry sectors and regions worldwide as well as the overall evolution of risk. For example, the report has highlighted the greater risk of multi-tier exposure as well as simple direct supply-chain exposure.

Likewise, Zurich’s involvement has helped reinforce the emergence of threats beyond just the physical to the less tangible risks, such as cyber risk. The report continues to benchmark business continuity arrangements in one place - including the uptake of insurance – in different organizations and is one of the most comprehensive, practitioner-led studies in the field. Zurich Insurance Group, BCI’s and CIPS involvement in previous surveys has and will continue to provide organizations with the much-needed critical insights and valuable information to support the development of appropriate strategic responses and approaches to mitigate the impact and consequences of disruptions within their supply chains.