The sources of supply chain failure are deeply rooted, says a survey from the Business Continuity Institute. Respondents from 62 countries revealed that 85 percent of organisations recorded at least one supply chain disruption in 2011 with 40 percent of analysed disruption originating below the immediate supplier.
The survey, now in its third year, emphasises the need for a higher priority to be assigned to developing resilient supply chains in the face of systemic vulnerabilities and unpredictable disruptive events. Supply chain and business continuity management techniques are available and offer the opportunity to better understand supply chain continuity risk and provide methods for managing continuity of key supply chains.
Supported by the Chartered Institute of Purchasing & Supply and sponsored by Zurich Financial Services and DHL Supply Chain, the survey report concludes that effectively managing supply chain continuity is critical not just because of the immediate costs of disruption, but also the longer term consequences to stakeholder confidence and reputation that may arise following a supply chain failure.
Further findings include:
• 51% cited adverse weather as being the main cause of disruption, maintaining its prominence from the 2010 report. Unplanned IT and telecommunication outages were the second most likely disruption, affecting 41%.
• Cyber attack has risen to become a top three source of disruption in the financial services sector.
• Supply chain incidents led to a loss of productivity for almost half of businesses along with increased cost of working (38%) and loss of revenue (32%).
• Longer term consequences of disruption in the supply chain included shareholder concern (19%), damage to reputation (17%), and expected increases in regulatory scrutiny (11%).
• The earthquakes and tsunami experienced in Japan and New Zealand this year, affected 20% of responding organisations, which were headquartered in 18 countries and 12 industry sectors.
• For 17% of respondents the financial costs of the largest single incident totaled a million or more Euros. This figure almost doubles to 32% where less resilient supply chains are evident in the research.
Lyndon Bird, technical director at the institute, commented: "While just-in-time efficiencies and outsourcing strategies are here to stay in some form, this survey shows it is more critical than ever to strike a sensible balance between the need to drive down costs and the need for these cost savings not to be wiped out through disruption or unacceptable risk exposure, especially in the context of the longer term reputational damage. Business continuity management can help in gaining a better understanding of likely supply chain behaviour when faced by disruption and help build confidence in an effective response and continuity of supply."
Based in Caversham, United Kingdom, the Business Continuity Institute was established in 1994 to promote the art and science of business continuity management and to assist organisations in preparing for and surviving minor and large-scale man-made and natural disasters. It has over 6,300 members in more than 100 countries.
