Counting The Cost

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Ineffective management of supply chains is leaving organisations open to severe disruptions and the high financial costs incurred as a result.

One in three organisations has experienced cumulative losses of over €1 million during the last year as a result of supply chain disruptions. This is according to a report published in November 2016 by the Business Continuity Institute, and supported by Zurich Insurance Group.

The report showed that, despite a decrease in the percentage of organisations that experienced at least one disruption (70% from 74%), those that did experience disruptions had eleven such incidences during the year increasing from 7% to 22%.

The increased cost of disruption could be attributed to significant increases in the loss of productivity (68% up from 58% in 2015), cost of working (53% up from 39%) and damage to brand or reputation (38% up from 27%), all as a result of supply chain disruptions.

43% of organisations do not insure these losses meaning that they are bearing the full brunt of the cost themselves.

Adequate visibility

Arguably one of the reasons for the increase in the number of disruptions for many organisations is that fewer of them are maintaining adequate visibility over their supply chain, with the percentage of organisations that do so decreasing from 72% in 2015 to 66%in 2016. This could have major consequences when it comes to managing the supply chain and ensuring that disruptions are minimised.

The report shows that ensuring supply chain visibility remains one of the biggest challenges to organisations with the data showing increased dependencies between suppliers and downstream organisations, reinforcing the need for organisations to understand their supply chain in more depth, identify key suppliers and improve reporting of disruptions.

The report also highlights that top management commitment is required in driving supply chain resilience and performance. The findings affirm how leadership input can significantly influence good practice and help build an appropriate organisational culture and structure.

Business continuity

Patrick Alcantara DBCI, Senior Research Associate at the BCI and author of the report, comments, “Our research abundantly shows how business continuity professionals, working with their supply chain counterparts, can build supply chain resilience and direct management efforts in this area.”

Business Continuity Institute

Andrew Scott

Email: andrew.scott@thebci.org

www.thebci.org