Organisations cannot simply bury their heads in the sand and pretend a supply chain incident will never happen to them, it’s claimed. Nearly a quarter respondents to a survey claimed their organisation had suffered losses of at least one million euros during the previous 12 months (up from 15pc last year) as a result of supply chain disruptions. That is according to the sixth BCI Annual Supply Chain Resilience Survey, from the Business Continuity Institute (BCI).
Some 13.2 percent suffered a one-off disruption that cost in excess of one million euros (up from 9pc last year). The study also showed that 40 percent of respondents claimed their organisation was not insured against any of these losses while a 20 percent were only insured against half these losses.
The survey showed that 76 percent of respondents had experienced at least one supply chain disruption during the previous twelve months, yet a quarter of respondents (28 percent) still had no BC arrangements in place to deal with such an event.
Supported by insurer Zurich, the report concludes that supply chain disruptions are costly and may cause significant damage to an organisation’s reputation. While the survey results indicate a growing awareness of BC and its role in ensuring supply chain resilience, many organisations have yet to improve on their reporting and BC arrangements.
While budgets for business continuity and ensuring supply chain resilience are often slashed in favour of other priorities, this study demonstrates why this often might not be a wise course of action. With the growing cost of disruption worldwide and the potential reputational damage caused as a result of failing to have appropriate transparency in the supply chain, investments in this area are essential and can spell the difference when disaster strikes. Further findings from the report include:
78.6 per cent of respondents do not have full visibility of their supply chains. Only 26.5 per cent of organisations coordinate and report supply chain disruption enterprise-wide. 44.4 per cent of disruptions originate below the Tier 1 supplier and 13 per cent of organisations do not analyse their supply chains to identify the source of the disruption.
The primary sources of disruption to supply chains in the last 12 months were unplanned IT and telecommunications outage (52.9 per cent), adverse weather (51.6 per cent) and outsourcer service failure (35.8 per cent).
The loss of productivity (58.5 per cent) remains as the top consequence of supply chain disruptions for the sixth year running. Increased cost of working (47.5 per cent) and loss of revenue (44.7 per cent) are also more commonly reported this year and round out the top three.
Respondents reporting low top management commitment to this issue have risen from 21.1 per cent to 28.6 per cent. This is a worrying finding as low commitment is likely to coincide with limited investment in this key performance area.
The percentage of firms having BC arrangements in place against supply chain disruption has risen from 57.7 per cent to 72.0 per cent. However, segmenting the data reveals that small and medium sized enterprises (SMEs) are less likely to have BC arrangements (63.9 per cent) than large businesses (76.2 per cent).
Lyndon Bird FBCI, Technical Director at the BCI, commented: “Should we be alarmed by some of the figures revealed in this survey? Perhaps so. Should we be surprised by them? Probably not. As long as organisations are failing to put business continuity mechanisms in place, and as long as top management is failing to give the issue the level of commitment it requires, supply chain disruptions will continue to occur and they will continue to cost the organisation dearly. In our globally connected world, these supply chains are becoming ever more complex and more action is needed to make sure that an incident in one organisation doesn’t become a crisis for another.”
Nick Wildgoose, Global Supply Chain Product Leader at Zurich Insurance Group, said: “Top level management support is fundamental to driving improvement in supply chain resilience; I have witnessed the significant disruption cost reductions that have been achieved by companies that are proactive in this area. This should be regarded as business change programme in the context of driving value through Supplier Relationship Management” and becoming the customer of choice for your strategic suppliers to improve your business performance.”
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