Frequent Supply Chain Disruptions in 2011

Eighty-five percent of companies surveyed recently by the Business Continuity Institute recorded at least one supply chain disruption in 2011, and 40% of those disruptions originated beyond the immediate supplier. The researchers pointed to the need for developing resilient supply chains in the face of systemic vulnerabilities and unpredictable disruptive events.

Supported by the Chartered Institute of Purchasing & Supply and sponsored by Zurich Financial Services and DHL Supply Chain, the survey report concludes that effectively managing supply chain continuity is critical not just because of the immediate costs of disruption, but also the longer term consequences to stakeholder confidence and reputation that may arise following a supply chain failure.

Further findings include:

• 51% cited adverse weather as being the main cause of disruption, maintaining its prominence from a 2010 report.

• Unplanned IT and telecommunication outages was the second most likely disruption, affecting 41%.

• Cyber attack has risen to become a top three source of disruption in the financial services sector.

• Supply chain incidents led to a loss of productivity for almost half of businesses along with increased cost of working (38%) and loss of revenue (32%).

• Longer term consequences of disruption in the supply chain included shareholder concern (19%), damage to reputation (17%), and expected increases in regulatory scrutiny (11%).

Last year’s earthquakes and tsunami experienced in Japan and New Zealand affected 20% of responding organizations, which were headquartered in 18 different countries and 12 different industry sectors.

“While just-in-time efficiencies and outsourcing strategies are here to stay in some form, this survey shows it is more critical than ever to strike a sensible balance between the need to drive down costs and the need for these cost savings not to be wiped out through disruption or unacceptable risk exposure, especially in the context of the longer term reputational damage,” said Lyndon Bird FBCI, technical director at the BCI. “Business continuity management can help in gaining a better understanding of likely supply chain behavior when faced by disruption and help build confidence in an effective response and continuity of supply.”

David Noble, Chief Executive Officer of the Chartered Institute of Purchasing & Supply (CIPS) added:

“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.”

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