Supply Chain Complexity Top Risk for Manufacturing Firms

Supply Chain Complexity Top Risk for Manufacturing Firms

A third (35%) of businesses in the manufacturing industry are extremely concerned about potential supply chain disruption according a report released last week by BSI, and the Business Continuity Institute.

More than three quarters of manufacturing firms (77%) report increasing supply chain complexity as the fastest growing risk in business continuity, with malicious attacks via the internet (68%) and increased regulatory scrutiny (58%) taking second and third place.

Risk exposure varies by sector. The proportion of supply chains exposed to elevated, high or severe risk of natural disaster is highest for the apparel (85.6%), automotive (53%) and aerospace (51%) sectors, all of which have a high proportion of manufacturing and raw material sourcing based in politically and geologically unstable regions.

While the relative risks differ, the key lesson for organizations to consider is their planning for potential disruption. For example, the automotive sector suffered heavily from the 2011 Japanese tsunami due to a global reliance on a single manufacturer of a particular pigment essential for metallic paint finishes. As a result of the disruption, production in the factory was halted for three months before normal operations resumed, causing long lasting effects across the automotive marketplace.

“Our experience shows that while companies are aware of and test for internal risks, they are failing to map or assess risk effectively across their supply chain,” said Shereen Abuzobaa, commercial director at BSI Supply Chain Solutions. More often than not, only the first tier of suppliers is considered with no thought given to those further down the supply chain. Testing and assessing every supplier across every tier is prohibitively time consuming for businesses. By concentrating on higher risk suppliers, companies can be more effective and confident in mitigating risks.”

Some tips for business continuity planning include the following:

  • Remember the seven ‘P’s needed to keep your business operational –Providers, performance, processes, people, premises, profile (your brand) and preparation. 
  • Understand and track past incidents with suppliers – Obtain country-level intelligence so you understand what factors may cause a supply chain disruption e.g. working conditions, natural disasters, and political unrest.
  • Assess and Understand Vulnerabilities and Weak Points – Conduct risk assessments to evaluate supplier capabilities to effectively adhere to your business continuity plans and requirements. 
  • Make sure plans are communicated to key staff and suppliers – Equally, share them with other key stakeholders to boost their confidence in your ability to maintain ‘business as usual’. This is particularly important for small businesses or those working with suppliers / buyers for the first time.
  • Make sure your continuity plans are nimble and can evolve quickly – If your plans look the same as they did 10 years ago, then they probably won’t meet current requirements.  Organizations engaged in business continuity management will be actively learning from their internal audits, tests, management reviews and even from incidents themselves. 
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