Lack of preparation for supply chain disruption ‘alarming’

5 July 2012

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5 July 2012 | Adam Leach

Issues such as faulty or sub-standard products and adverse weather conditions are costing UK businesses an average of £200,000 a year according to Zurich Insurance.

The Weakest Link: UK Plc’s Supply Chain, which is based on research with 500 businesses with revenues between £5 million and £300 million, found 88 per cent of respondents suffered disruptions to their supply chain operations. These disruptions caused respondents to suffer through lost orders and sales, increased operating costs and reputational damage - with the average cost estimated at £200,000, excluding those costs incurred through damage to the corporate reputation.

Over half (57 per cent) of businesses identified product quality issues as the cause of disruptions. Adverse weather conditions (45 per cent) and unplanned IT outages were the next most common causes. Despite the significant cost to businesses, the report found that more than half, 55 per cent, of respondents have not reviewed their supply chain within the last six months.

Nick Wildgoose, global head of supply chain at Zurich, said in a statement: “The lack of preparation and business continuity planning amongst businesses, particularly those who are highly dependent on suppliers [the average cost to manufacturers was highest, at £228,000 a year], is alarming.”

Richard Nixon, corporate advisory partner at KPMG, said  responsibility for contingency planning needs to be given to a specific team.

“The biggest problem is that departments look at risk within their own silos rather than across the business as a whole,” he said, speaking at a recent event for clients of the professional services firm. “It may be true that there is still no home for supply chain risk, but until businesses evolve and mature to the point where this changes, it is critical that the board gives clear responsibility to one function.


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