What is supply chain disruption costing your company?

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Have you sat down recently and calculated what disruptions to your supply chain might be costing you? And not just the direct cost, but the impact in terms of lost sales and damaged reputations?

The average cost is £200,000, according to a new study by Zurich Insurance which surveyed 500 businesses with annual revenues of between £5 million and £300 million across manufacturing, technology, food and beverage, sport leisure and entertainment and wholesale businesses.

And the report, entitled “The Weakest Link: UK Plc’s Supply Chain”, found  that nine out of ten organisations had experienced significant disruptions to their supply chains.

The top three common causes of disruption were product quality incidents (57 per cent), adverse weather (45 per cent) and unplanned outage of IT (39 per cent). The average length of disruption was five weeks.

For 60 per cent of the companies, the disruptions led to loss of orders and sales, followed by reputational damage (43 per cent) and increased operating costs (43 per cent).

The sector that faced the biggest cost impact was manufacturing  an average £228,608 per company over the past 12 months.

So perhaps it is surprising that more than half of those surveyed had not reviewed their supply chain within the past six months.

Zurich’s supply chain head Nick Wildgoose describes this as “alarming” and it’s hard to disagree – even if it is understandable given the pressures on supply chain professionals.

A quick scan of the press shows that in just the past few days storms in the eastern United States knocked out electricity supplies to two million people; heavy rain in the UK led to widespread flooding across the north; and flooding in India forced two million people out of their homes.

And the report suggests that over one third of mid-sized UK companies predict the Olympics will cause greater supply chain disruption. Why shouldn’t part of the legacy of the London games be better planning for business disruption?

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