Nearly one in 10 organizations don’t know who their key suppliers are, which leaves them open to severe disruption because they are unable to manage their supply chain effectively, according to a report published today by the Business Continuity Institute and supported by Zurich Insurance Group.
The “Supply Chain Resilience Report” includes some startling findings, such as that only 14 percent of the executives surveyed from small and medium-sized enterprises (SMEs) believe their business would be significantly affected if were they to lose their main supplier. Overall, 39 percent of the respondents consider their companies to be at some level of risk from the loss of their main supplier, while 55 percent believe the loss of their most important supplier would not influence their day-to-day business.
Even more surprising, and in contrast, the survey found that seven in 10 organizations admit to not having visibility over their full supply chain. “This makes us believe that SMEs probably underestimate their supply chain’s risk exposure, and we urge them to reassess this,” says Nick Wildgoose, global supply chain product leader at Zurich Insurance Group.
The survey results also found that half of supply chain disruptions occur below Tier 1 suppliers. As the report notes, this could have major consequences when it comes to managing the supply chain and ensuring that disruptions are minimized. That’s particularly important given that the report also found that 74 percent of organizations had suffered at least one disruption during the previous 12 months, and that 14 percent of the organizations had suffered cumulative losses of at least $1 million European as a result.
I was interested to see that unplanned IT and telecommunications outage (cited by 64 percent of the respondents), cyberattack and data breach (cited by 54 percent of the respondents) and adverse weather (cited by 50 percent of the respondents) are the top three causes of supply chain disruption listed in the report. Interestingly, new entries to the list of top 10 causes of supply chain disruption are product quality incident (in 8th place), business ethics incident (in 9th place) and lack of credit (rounding out the top 10).
Also of note, when asked about the consequences of a supply chain disruption, loss of productivity was the most frequently named consequence, cited by 58 percent of the respondents. Customer complaints was named the second leading consequence, cited by 40 percent of the respondents. Rounding out the five most significant consequences were increased cost of working, loss of revenue and impaired service outcomes.
There is good news in the report as well. For example, one third of the respondents report high top-management commitment to supply chain resilience, which is an increase from 29 percent of the respondents last year. Also, 68 percent of the respondents report that their company has business continuity arrangements in place to deal with supply chain disruptions.
“Through our work with customers in this area, we’ve found that increasing supply chain visibility and resilience are major sources of competitive advantage,” says Wildgoose. “Top management leadership is the key to overcoming silo thinking about supply chains within an organization.”
What I’d like to know, is whether your company has good supply chain visibility and everyone knows who the key suppliers are? Secondly, are key executives committed to supply chain resilience?