The good news is that the overall number of organizations experiencing supply chain disruptions fell from 74 percent in 2015 to 70 percent in 2016. The bad news is that organizations which did suffer disruptions suffered more of them, with the percentage of organizations experiencing at least 11 disruptions during the year increasing from seven percent in 2015 to 22 percent in 2016, according to The Supply Chain Resilience Report, published by the Business Continuity Institute and supported by Zurich Insurance Group. Furthermore, while the percentage of organizations reporting losses in excess of €1 million from a single incident remains static at nine percent, supply chain disruptions have cost one in three organizations more than €1m in the last year, the report notes.
There are a number of key findings in the report. For instance, unplanned IT and telecommunications failures remains the top cause of disruption, with loss of talent/skills moving up to 2nd place from 6th in 2015. The other top causes of disruption were outsourcer failure, transport network disruption and cyber-attack or data breach. Startlingly, 40 percent of the respondents indicated their organization doesn’t analyze the source of supply chain disruption.
The consequences of supply chain disruptions are notable as well. For instance, respondents cited increased costs linked to significant increases in the amount of lost productivity, increased cost of working, customer complaints, impaired service outcomes and damage to brand reputation and loss of revenue as the consequences of supply chain disruptions. Increases in lost productivity and damage to brand or reputation were most significant, with lost productivity cited by 68 percent of the respondents (up from 58 percent in 2015); and damage to brand or reputation cited by 38 percent of the respondents (up from 27 percent in 2015). The survey found 43 percent of organizations don’t insure these losses, and so bear the full brunt of the cost themselves.
Arguably, one of the reasons for the increase in the number of disruptions for many organizations is that fewer of them are maintaining adequate visibility over their supply chain, the report notes. Indeed, the percentage of respondents reporting that their organization maintains adequate supply chain visibility decreased from 72 percent in 2015 to 66 percent this year.
This could have major consequences when it comes to managing the supply chain and ensuring that disruptions are minimized, the report continues. It further notes that ensuring supply chain visibility remains one of the biggest challenges for organizations with the data showing increased dependencies between suppliers and downstream organizations, reinforcing the need for organizations to understand their supply chain in more depth, identify key suppliers and improve reporting of disruptions.
There are two other “worrisome” findings, the report notes. The first is that only 27 percent of the respondents reported top management commitment to supply chain resilience, down from 33 percent last year. Secondly, only 73 percent of the respondents indicated their organization has business continuity arrangements in place to deal with supply chain disruptions.
A lack of top management commitment is important to address because that commitment is required to drive supply chain resilience and performance, the report notes. The findings “affirm how leadership input can significantly influence good practice and help build an appropriate organizational culture and structure,” the report concludes.
What are your thoughts on supply chain disruptions? Have they increased or decreased for your organization?