Rise in disruption exposes companies' vulnerabilities

31 August 2008
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01 September 2008 | Jake Kanter

Disruption to supply chains has increased "significantly" over the past two years, according to research by consultancy firm McKinsey.

A survey of 273 business executives globally found 77 per cent had seen a rise in supply chain disruption, compared with 65 per cent in 2006.

According to 47 per cent of respondents, the growing complexity of products and services was the dominant issue affecting their supply chain strategy, while 36 per cent said it was rising energy prices. Some 29 per cent said increasing global financial volatility was an issue.

Just over half - 56 per cent - said they were managing risk in response to these trends. Other actions included improving efficiency and increasing low-cost country sourcing.

Another study of 138 global firms by the Aberdeen Group published this month found 99 per cent had been affected by at least one incident in their supply chain over the past 12 months. In addition, 58 per cent of the respondents said they had incurred financial losses as a result of the disruption.

Despite this, 41 per cent of the companies only deal with threats on a reactive basis or have no risk management strategy in place. Of this group, 52 per cent said their business objectives were not aligned enough to form risk mitigation schemes, and 55 per cent said they lacked the right data.

According to the McKinsey study, the main challenge of rolling out a global supply chain is finding the resources to manage it once it is in place. Other difficulties include managing safety and/or quality and integrating suppliers with IT systems.



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