Over 70 per cent of organisations have experienced at least one supply chain disruption in 2010, a survey by the Business Continuity Institute reveals.
The survey, Supply Chain Resilience 2010 which is sponsored by Zurich, covers 35 countries and 15 industry sectors, and shows that while awareness of supply chain risks is increasing, many businesses remain exposed to high levels of risk.
A key conclusion is that outsourcing, in particular in IT and manufacturing, often ultimately reduces cost-benefits through greater exposure to supply chain disruption. Other findings include:
* Adverse weather was the main cause of disruption around the world, with 53 per cent citing it – up from 29 per cent last year.
* Unplanned IT and telecommunication outages was the second most likely disruption and the failure of service provision by outsourcers was third, up to 35 per cent from 20 per cent in 2009. These incidents led to a loss of productivity for over half of businesses.
* The average number of identified supply chain risks in the past 12 months was five, with some organisation reporting over 52.
* 20 per cent admitted they had suffered damage to their brand or reputation as a result of supply chain disruptions. For ten per cent of companies the financial cost of supply chain disruptions was at least 500,000 euros.
* Where businesses have shifted production to low cost countries they are significantly more likely to experience supply chain disruptions, with 83 per cent experiencing disruption. The main causes were transport networks and supplier insolvency.
* 50 per cent have tried to optimise their businesses through outsourcing, consolidating suppliers, adopting just-in-time, or lean manufacturing techniques.
* Only seven per cent had been fully successful in ensuring suppliers adopted business continuity management practices to meet their needs, with nearly a quarter not taking this step. Even when suppliers were regarded as key to their business, nearly half of respondents had not checked or validated their supplier’s business continuity plans.
The report concluded that most organisations sit at some point between the polarities of “no risk at any price” and “lowest cost at any risk” but the survey indicates that business continuity is still overlooked in supply chain decisions.
“The findings also highlight the fact that increased disruption is a reality not just a threat when pursuing such decisions, however the intelligent application of BCM can help support organisation take advantage of such supply chain optimization techniques, as part of an overall enterprise-wide resilience strategy.”
And, it says: “Perhaps, the greater challenge is in embedding business continuity considerations in strategic and operational business decisions; this requires cooperation across a broad coalition of resilience professionals to demonstrate the benefits of such thinking in the context of the organisation’s risk appetite.”