Firms face ‘major consequences’ due to lack of supply chain visibility

posted by Anna Scott
in Risk
23 November 2015

A significant number of organisations are at risk of severe disruption to their supply chains because they are not aware of who their key suppliers are, according to a report.

Seventy two per cent of the organisations surveyed by the Business Continuity Institute (BCI) and Zurich Insurance Group said they do not have full visibility of their supply chains. And nearly one in ten of the 537 organisations from 67 countries surveyed said they do not even know who their major suppliers are.

This could have major consequences for managing the supply chain and ensuring disruptions are minimised, particularly given that 74 per cent of respondents experienced at least one disruption during the previous year and 14 per cent suffered cumulative losses of at least €1 million (£701,785), the report said.

In addition, half of disruptions reported occurred below tier one supplier level, making it extremely difficult to establish where an organisation lies within its suppliers’ priorities.

“Recent incidents have shown us how supply chain disruptions can negatively impact an organisation’s bottom line, reputation and resilience,” said Patrick Alcantara, senior research associate at the BCI.

The top cause of supply chain disruption is unplanned IT and telecommunications outage, experienced by 64 per cent of respondents. This is followed by cyber attacks and data breach (54 per cent) and adverse weather (50 per cent). In addition, three types of disruption made it into the top ten for the first time in the seven years since the report was launched – product quality incident, business ethics incident and lack of credit.

Loss of productivity, experienced by 58 per cent of respondents, was the most common consequence of disruption, followed by customer complaints (40 per cent), increased cost of working (39 per cent), loss of revenue (38 per cent) and impaired service outcomes (36 per cent).

The proportion of respondents reporting commitment to supply chain resilience from the top layer of management in their organisations has risen from 29 per cent last year to one third this year.

“Good practice can mitigate the worst effects of these disruptions,” Alcantara added. “With findings consistently showing top management commitment as a key enabler of supply chain resilience, we encourage business leaders to take a closer look at their supply chains and champion good practice across their organisations.”

Nick Wildgoose, global supply chain product leader at Zurich, added: “We have found that increasing visibility among supply chains and resilience are major sources of competitive advantage. Top management leadership is the key to overcoming silo thinking about supply chains within an organisation.”

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