Nearly a quarter of the respondents to a recent survey indicated their organization had suffered losses of at least $1.25 million during the previous 12 months (up from 15 percent last year) as a result of supply chain disruptions. What’s more, 13.2 percent of the survey respondents noted their organization suffered a one-off disruption that cost in excess of $1 million (up from 9 percent last year). The report, released earlier this week by the Business Continuity Institute (BCI), also shows that 40 percent of the respondents claim their organization wasn't insured against any of these losses while 20 percent of the companies were only insured against half of the losses.
None of that is to imply that supply chain disruptions aren’t widespread. Indeed, according to survey responses, 76 percent of the participating companies had experienced at least one supply chain disruption during the previous twelve months. Interestingly, 28 percent of the respondents also indicated their company still does not have business continuity arrangements in place to deal with such an event.
There are a number of other interesting findings as well. For example, 78.6 percent of the respondents say their company doesn’t have full visibility of its supply chains. Only 26.5 percent of the participating organizations coordinate and report supply chain disruption enterprise-wide. Nearly half of the supply chain disruptions cited by the survey respondents originated below the Tier 1 supplier.
The primary sources of supply chain disruption, as noted by survey respondents, over the past 12 months were unplanned IT and telecommunications outage (cited by 52.9 percent of the respondents), adverse weather (51.6 percent) and outsourcer service failure (35.8 percent).
When it comes to identifying the main consequences of supply chain disruptions within the past 12 months, loss of productivity was cited most frequently (58.5 percent of the responses)—for the sixth year running. It was followed by increased cost of working (cited by 47.5 percent of the respondents) and loss of revenue (noted by 44.7 percent of the respondents).
Finally, in a bit of good news, survey respondents report top management commitment to business continuity has risen (up from 21.1 percent to 28.6 percent of the organizations). Nonetheless, that still is a low commitment and, most likely, will coincide with limited investment in this key performance area.
“Top level management support is fundamental to driving improvement in supply chain resilience—I have witnessed the significant disruption cost reductions that have been achieved by companies that are proactive in this area,” says Nick Wildgoose, Global Supply Chain Product Leader at Zurich Insurance Group, which sponsored the survey. “This should be regarded as business change program in the context of driving value through Supplier Relationship Management and becoming the customer of choice for your strategic suppliers to improve your business performance.”
I suppose the takeaway from the findings is that there is a growing awareness that supply chain disruptions have the potential to be extremely costly. At the same time, budgets for business continuity and ensuring supply chain resilience are often slashed in favor of other priorities. However, considering the growing cost of supply chain disruption worldwide and the potential for considerable damage to a company’s reputation as a result of a failure to have supply chain visibility and business continuity plans in place, one must wonder what it will take for the situation to change.
Does your organization have executive support for business continuity?