Study: Supply Chain Failure Remains a Chronic Headache

Supply chain failures continue to plague companies worldwide.

A recent study conducted by the Business Continuity Institute (BCI) found that a full 85 percent of the companies surveyed recorded at least one supply chain disruption in 2011. Interestingly, 40 percent of those disruptions originated further down the supply chain, past first tiers suppliers.

The research, which analyzed responses from more than 550 organizations across more than 60 countries, also revealed that:

The top two causes of supply chain disruptions were adverse weather conditions (51 percent) and unplanned IT and telecomunications outages (41 percent).

Cyber attacks were the number three source in the financial services sector.

Longer term consequences of disruption included: questions from shareholders (19 percent), reputational damage (17 percent) and more regulatory scrutiny (11 percent).

The financial costs of the largest single incident totaled at least a million Euros for 17 percent of survey respondents.

Just 8 percent reported that all of their key suppliers had business continuity programs in place to deal with disruption.

Now that supplier networks are global and enormously complex, they're also punctuated with significant threats and reports of supply chain failure are on the rise. Last year, more than 70 percent of companies reported supply chain disruptions. This year, 85 percent did. Unfortunately, though, companies appear slow to update their preparedness plans. In 2010, 7 percent were confident suppliers had business continuity programs in place. This year, that percentage was essentially unchanged. And, these new results make it clear that companies need to keep a careful eye on second and third tier suppliers, as well.

"Supply chain risk management is gaining more recognition each year, and for good reason. Disruptions to supply chains are becoming virtually commonplace and as the BCI report shows a high proportion of disruptions happen further down the supply chain in places many companies don't look such as second or third tiers suppliers. It often comes as a surprise when trouble hits," said David Noble, Chief Executive Officer of the Chartered Institute of Purchasing & Supply (CIPS). "Our own UK research this year supported similar findings that certain sectors are lagging behind on awareness so whether it's energy surges, or adverse weather conditions, the planning and mitigation of that risk will help prevent expensive reputation and revenue damage at the very least."

The 34-page report is available here. (Registration required.)

TAGS: Finance
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