As many as 60 per cent of companies pay only marginal attention to supply chain risk reduction processes, according to a new study by the Study by the MIT Forum for Supply Chain Innovation and PwC.
And yet, it reported that in the past 12 months more than 60 per cent of the companies surveyed said that their performance indicators had dropped by three per cent or more as a result of supply chain disruptions.
The report, Supply chain and risk management – making the right decisions to strengthen operations performance, highlights five principles that companies can learn from to manage supply chain risk.
!. Supply chain disruptions have significant impact on company business and financial performance.
2. Companies with mature supply chain and risk management capabilities are more resilient to supply chain disruptions. They are impacted less and recover faster than companies with immature capabilities.
3. Mature companies investing in supply chain flexibility are more resilient to disruptions than mature companies that do not invest in supply chain flexibility.
4. Mature companies investing in risk segmentation are more resilient to disruptions than those that don’t.
5. Companies with mature capabilities in supply chain and risk management do better along all surveyed dimensions of operational and financial performance than immature companies.
Top of the list of sources of supply chain risk was fluctuations of raw material prices followed by currency fluctuations, market changes, fuel price volatility, and environmental catastrophes.
It suggested that to reduce vulnerability and exposure to high impact supply chain disruptions, companies need advanced capabilities along two dimensions: supply chain management and risk management.