No room for complacency

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Losses from supply chain disruption increased by 465 per cent from 2009 to 2011 – and at the same time, the number of companies experiencing supply chain disruption grew by 15 per cent.

Stark figures, but not entirely surprising given that natural disasters we have seen over the past couple of years, combined with the impact of a global recession.
Perhaps more notable is the fact that in this environment, companies are increasingly looking to their third party logistics providers to mitigate these supply chain risks.

The results come from the global study of the third party logistics market conducted annually by Capgemini Consulting, in co-operation with Penn State University, Korn/Ferry International, and Panalpina.

The study, covering 2,300 shippers and 3PLs around the world, highlights a number of factors, including extended supply chains, reduced inventories and shortened product lifecycles that are making supply chain disruption both more likely and more costly than ever before.

Not surprisingly, adverse weather and the threat of a pandemic come out at the biggest source of supply chain disruption, cited by 69 per cent of shipper respondents, while volatility in commodity, labour or energy costs as the second, is cited by 59 per cent.

These changes are having an impact on the third party logistics sector where some 44 per cent of companies say they are focusing more on supply chain risk and mitigation strategies than they did five years ago.

Closer partnerships, improved business continuity planning, advanced supply chain visibility tools and better employee training come out top among the mitigation tactics.

But, the pressure to cut costs will continue, driving companies to source from further afield, centralise production and stockholdings, and reduce inventories – all of which can magnify the impact of any disruption.

The study warns that many companies are currently under-funding supply chain disruption mitigation. And more advanced strategies need to be put in place such as supply chain mapping and enterprise risk management. Clearly, there is no room for complacency.
Malory Davies FCILT,

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