Caversham, UK - 2nd November 2011: A newly published survey from the Business Continuity Institute (BCI) has revealed deep-rooted sources of supply chain failure. Respondents from across 62 countries revealed that 85% of organisations recorded at least one supply chain disruption in 2011 with 40% 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 was 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 different countries and 12 different industry sectors.
• For 17% of respondents the financial costs of the largest single incident totalled a million or more Euros. This figure almost doubles to 32% where less resilient supply chains are evident in the research.
Lyndon Bird FBCI, Technical Director at the BCI, 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."
David Noble, Chief Executive Officer of the Chartered Institute of Purchasing & Supply (CIPS) added:
"Supply chain risk management is gaining more recognition each year, and for good reason. Disruptions to supply chains are becoming virtually commonplace and as the BCI report shows a high proportion of disruptions happen further down the supply chain in places many companies don't look such as second or third tiers suppliers. It often comes as a surprise when trouble hits. Our own UK research this year supported similar findings that certain sectors are lagging behind on awareness so whether it's energy surges, or adverse weather conditions, the planning and mitigation of that risk will help prevent expensive reputation and revenue damage at the very least."
Nick Wildgoose, Global Supply Chain Product Manager at Zurich Global Corporate, commented:
"This is the third year of the survey and shows the highest level of companies reporting a supply chain disruption at 85%, although levels have consistently been above 70%. At Zurich, we are finding that an increasing number of our customers are realising that they can reduce costs of disruption and gain competitive advantage by understanding their critical supply chains risks better. The survey result that 40% of disruptions are below tier one also reinforces the importance of driving supply chain understanding to below the supplier tiers with whom the customer interacts directly."
Ruth Robottom, Supply Chain Development Manager at DHL Supply Chain, commented;
"While outsourcing and seeking out lower manufacturing, operating and labour costs have enabled companies to remain competitive; supply chains are now, as a consequence, more stretched and vulnerable to supply chain disruption than ever. Risk assessments, and an overall review of the end to end supply chain can provide insight, improved visibility and highlight potential risks or disruptions. The survey underlines the need for robust and regularly reviewed business continuity programmes throughout the supply chain and provides great insight into what measures are being taken to ensure supply chains become more resilient."