Dealing with disruption

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“We’re now seeing the downside of years of outsourcing, extended supply chains and focus on core competency; organisations are now much more vulnerable to supply chain disruption than in the past.”

That’s the warning from Lyndon Bird, international and technical director of the Business Continuity Institute which has just published a new study on the resilience of supply chains.

“While companies have banked the cost savings, this research indicates they have still to make the corresponding investment in resilience,” says Bird.

Disruption to supply chains has risen by 35 per cent over the past year, the study shows, and manufacturers have been particularly hard hit, reporting a 58 per cent increase.

The report, Supply Chain Resilience, is supported by Zurich Insurance. It found that three quarters of respondents experienced disruption in their supply chain in the past 12 months. The chief causes of disruption were: the economic recession, swine flu, and IT and telecom disruption.

The impact of the disruption was primarily a loss of productivity, although loss of revenue, customer complaints and delayed product availability also featured highly.

There are always going to be incidents outside of anyone’s control that could disrupt a supply chain – the important thing is to have mechanisms in place to deal with them. And, to be fair, the BCI report found that some organisations were very good at business  continuity – about one in nine.

But almost two thirds of organisations felt that they had been only partially successful in getting their business continuity needs adopted through their supply chain.

Clearly, there is a balance to be achieved between increasing the cost-efficiency of supply chains and maintaining resilience. I suspect that many organisations will be wondering if more focus on resilience is now indicated.

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