Tuesday, 5 August 2014

Keeping your eye on the ball (or your supply chain, that is)

Any professional dealing with supply chains knows how complicated its management is. Supply chain disruptions are Murphy’s Law exemplified – anything that can go wrong, will. In the last five years, respondents of the global BCI Supply Chain Resilience Survey have named all sorts of consequences that supply chain disruptions may bring. These range from lost productivity, customer complaints, reputational damage, and even increased scrutiny from regulators, among many others. Costs associated with supply chain disruption are staggering. In fact, 13% of respondents in this survey report losing at least €1 million in a given year.

Given how supply chain disruptions can cause so much damage, it is surprising to note that many organisations are still in the dark. Almost 40% of organisations surveyed do not track supply chain incidents at all. To those who do, gaps are still present – more than 15% do not analyse the source of disruption. As more incidents stem from lower tiers of a supply chain (suppliers of suppliers, or even further down), the potential for loss is great. This lack of visibility has caused some high-profile incidents, such as the horse meat scandal or the Bangladeshi garments factory collapse, leaving companies up the chain scrambling to recover lost profits and reputation.

This evidence points to the need for companies to improve the visibility of their supply chains. Ensuring that companies do not keep their eye off the ball – or their supply chain, in this case – is crucial given that incidents are bound to occur. This can be done in several ways such as continuously working out overall business continuity (BC) strategy, checking how suppliers’ BC arrangements measure up to threats, and constantly engaging with suppliers. Whilst these may be a daunting challenge for supply chain professionals, ensuring top management buy-in and investment in supply chain resilience will facilitate this process.

Retaining the status quo may cost nothing in the short term, but it only takes an incident to bring a company down to its knees. Whilst this is not meant to cause alarm, it is sobering advice that must be heeded. Given the evidence behind the consequences and cost of disruption, companies stand to profit from embedding resilience within their supply chains. Visibility is the key to ensuring supply chain resilience, and must be given priority in company strategy.

The global Supply Chain Resilience Survey sponsored by the Business Continuity Institute and Zurich Insurance is ongoing here. In its sixth year, this study aims to track the origins and consequences of supply chain disruption and benchmark BC arrangements in place worldwide. A copy of last year’s report may be found here whilst a five-year trend analysis may be requested from the BCI.

Patrick Alcantara Patrick Alcantara is a Research Associate for the Business Continuity Institute who joined after finishing a Masters in Lifelong Learning with distinction from the Institute of Education (University of London) and Deusto University.

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