Business Continuity Institute (BCI) research has exposed the high costs that businesses are facing as a result of supply chain disruptions in this increasingly interconnected world. Nearly a quarter of businesses surveyed have suffered from disruptions within the past year that cost in excess of €1 million, with 40% of them not having sufficient insurance to cover those losses. 20% were only insured against half of these losses.
Organisations simply cannot bury their heads in the sand and pretend an incident will never happen to them. The BCI survey shows that 76% of respondents had experienced at least one supply chain disruption during the previous twelve months, yet a quarter of respondents (28%) still had no business continuity arrangements in place to deal with such an event.
Supported by global insurer Zurich Insurance Group, the BCI report concludes that supply chain disruptions are costly and may cause significant damage to an organisation’s reputation.
While the survey results indicate a growing awareness of business continuity and its role in ensuring supply chain resilience, many organisations have yet to improve on their reporting and business continuity arrangements. Budgets for business continuity and ensuring supply chain resilience are often slashed in favour of other priorities, but this latest study demonstrates why such a move is often found to be an unwise course of action.
With the growing cost of disruption worldwide and the potential reputational damage caused as a result of failing to have appropriate transparency in the supply chain, investments in this area are essential and can make the difference when disaster strikes.
Further findings from the research are as follows:
• 78.6% of respondents don’t have full visibility of their supply chains
• Only 26.5% of organisations co-ordinate and report supply chain disruption on an enterprise-wide basis
• 44.4% of disruptions originate below the Tier 1 supplier
• 13% of organisations don’t analyse their supply chains to identify the source of the disruption
• The primary sources of disruption to supply chains in the last 12 months were unplanned IT and telecommunications outages (52.9%), adverse weather conditions (51.6%) and outsourced service failure (35.8%)
• Loss of productivity (58.5%) remains the top consequence of supply chain disruptions for the sixth year running
• Increased cost of working (47.5%) and loss of revenue (44.7%) are also more commonly reported this year and round out the Top Three
• Respondents reporting low top management commitment to this issue have risen from 21.1% to 28.6%. This is a worrying finding as low commitment is likely to coincide with limited investment in what is a key performance area
• The percentage of firms having business continuity arrangements in place against supply chain disruption has risen from 57.7% to 72.0%. However, segmenting the data reveals that small and medium-sized enterprises (SMEs) are less likely to have such arrangements in place than large businesses (with scores of 63.9% and 76.2% respectively)
Commitment to business continuity
Lyndon Bird FBCI, technical director at the BCI, commented: “Should we be alarmed by some of the figures revealed in this survey? Perhaps so. Should we be surprised by them? Probably not. As long as organisations are failing to put business continuity mechanisms in place, and as long as top management is failing to give this issue the level of commitment it requires, supply chain disruptions will continue to occur and they will continue to cost organisations dearly. In our globally connected world, these supply chains are becoming ever more complex and more action is needed to make sure that an incident in one organisation doesn’t become a crisis for another.”
Nick Wildgoose, global supply chain product leader at Zurich Insurance Group, commented: “Top level management support is fundamental to driving improvements in supply chain resilience. I’ve witnessed the significant disruption cost reductions can have in this area. This should be regarded as a business change programme in the context of driving value through supplier relationship management and becoming the customer of choice for your strategic suppliers to improve your business performance.”
Now in its sixth year, the BCI’s annual Supply Chain Resilience Survey has established itself as an important vehicle for highlighting and informing organisations of the importance of supply chain resilience and the key role it plays in achieving overall organisational resilience in today’s volatile global economic climate.
The outcomes of previous surveys have provided organisations with critical insights and valuable information to support the development of appropriate strategic responses and approaches to mitigate the impact and consequences of disruptions within their supply chains.
In terms of this year’s online survey, 525 respondents emanated from 71 countries working in 14 SIC industry sectors. The majority of respondents were from outside the UK.
A major survey from State of Flux – entitled: ‘2014 Global Supplier Relationship Management Research Report’ – was published on 6 November and reinforces the importance of this area as part of overall business performance.