• Delivery Assurance
• Visibility and Risk Control
• Cost Containment
Supply Chains are becoming more complex and as a result so are the risks that lay within them. That is one of the findings in the recent 5th Annual Survey into Supply Chain Resilience 2014 by Zurich Insurance and BCI.
While supply-chain disruptions are increasing—over the past four years, 75% of respondents annually experienced at least one incident—they are also occurring further inside the supply chain. Forty-two percent of business interruptions originated below the tier-one supplier (supplying parts to the manufacturer of the final product) in 2013.
The top-three causes of disruption occurred from unplanned IT or telecommunications outages, followed by adverse weather (40%) and service failure by outsourced providers (37%).
However, non-physical causes of interruption (that don’t deter the immediate supply of a product or service but require crisis response to stakeholders or longer-term damage) made an impactful appearance: high-profile media reporting of the danger of cyber attacks rose from 18th place in 2012 to 5th place in 2013, and the non-availability of loss of talent increased from 10th place to 6th.
Forty-one percent of respondents stated that customer complaints received after a disruption increased since 2012, placing it second behind loss of productivity as the primary consequence of supply-chain disruption. Twenty-four percent experienced reputational damage to their brand, but only 3% said it caused a fall in share price.
“Different parts of the organization need the supply chain to deliver different and potentially conflicting outcomes,” says Zurich.
The report recommends several steps to reconcile enterprise-wide gaps in supply chain planning:
Asking suppliers whether they have activated their BC plans with previous clients, and report their results.
Asking suppliers how they identify their own ‘critical suppliers’ and what due diligence they undertake with them.
Ensuring the vendor has a BC program and plan, the business has recovery capability built into their BCPs for reduced services in the event of a supplier being impacted, as well as contingency plans owned and developed by the business to cover total loss of a material supplier.
Understanding the risk appetite of the directors of the supplier, this can be a guide as to whether the organization takes resilience seriously and their responsibility to their customers’ continuity.
Categorizing disruptive and financially significant suppliers and conducting annual due diligence and regular meetings with these parties.
A disruptive event will be catastrophic to your balance sheet in the year of the event. The average cost of £700k per event is recognised by business interruption professionals for a medium sized business, this figure is the total cost of arranging emergency availability of:-
Additional Staff, Security, Alternative Offices, Replacement Plant Rental, Salvage Services, Transport, Regulatory Inspections.
The impact on the annual balance sheet in an event year can easily reduce or wipe out a profit resulting in a whole year’s performance effort wiped out. Consider if your company is average or bigger than average? Consider how complex your organisation has become over the years from the hard effort of your team and ask can you risk the cost and disruption of rebuilding part or all of it?
In the manufacturing and production sector the top causes of disruption were reported as issues with quality of product – possibly due to outsourcing to areas with cheaper labour. Additionally, supply chains were also impacted by energy scarcity and price fluctuations in fuel and shipping. Good contingency planning will enable a company to mitigate these risks.
How well do you understand the depth of your supply chain? Nearly 30% of respondents stated that they do not query which suppliers their own supply partners are dealing with and what arrangements they have in place to ensure continuity.
The financial cost of these disruptions are increasing with 15% of those reporting an incident admitting the disruptions had cost at least between £1m and £10m in total with costs being borne for over 12 months after the event.
Signacure offer a managed service specifically to allow you to assess and collaborate with your suppliers to achieve ongoing visibility of threats so you can defend your interests but also to have critical contingency planned for key processes so if the worst does happen you can act with agility.