30 June 2011 | Adam Leach
Organisations’ failure to share information with
each other is limiting their ability to protect themselves from supply chain
risks, such as pandemics, cyber attacks and further economic crises.
A report by the Organisation for Economic Co-operation and Development (OECD) has found supply chains will
become more vulnerable to the impact of disasters around the world due to
globalisation and a reluctance by organisations to openly share information.
The OECD, which presented the findings of two
years research in its Future Global Shocks report
this week, said: “The infrastructure for real-time data gathering and
surveillance is weak for certain important hazards, and the sophistication of
maps and models has surpassed the willingness to share some types of
The report recommends organisations “step-up
efforts to acquire and share data and a variety of simulation models to better
anticipate and assess potential shocks”.
“Once a disaster strikes it is too late to create
effective plans to cover the fallout for production, employees, reputation,
supply chains or service disruption,” said the study. “Contingency plans for a
broad range of adverse event scenarios must be in place, and they must build in
flexibility to account for unknowns that can generate extreme events.”
The OECD suggests organisations would better
protect their supply chain in the future by learning from the impact of
previous disasters or disruptions.
Companies were urged by the report to increase the
level of resources allocated to surveillance and monitoring of threats and
early warning systems. It also stressed the importance of improving
international co-operation to promote diversity in critical systems and enhance
multi-stakeholder partnerships, information sharing, capacity building, stress
tests and drills.
To lessen the impact of volatile commodity prices,
the OECD said long term purchase arrangements that use a combination of fixed
and indexed prices would help buyers acquire supplies at a stable cost.
To effectively manage supply chain threats, the
report said companies must establish regular communication across departments
ranging from procurement to finance to ensure commodity price risk management
practices fit with corporate objectives.