Business Continuity Institute publishes supply chain failure research
The Business Continuity Institute (BCI) has released the results of a survey on the impacts of the supply chain on business continuity. The research, covering 35 countries, shows that over 70 percent of organizations recorded at least one supply chain disruption in 2010.
The BCI says that the survey shows that while awareness of supply chain risks is increasing, many businesses remain exposed to high levels of risk; and the survey report concludes that outsourcing, in particular in IT and manufacturing, often ultimately reduces cost-benefits through greater exposure to supply chain disruption.
Key Findings
- 72% of respondents experienced at least one disruption in their supply chain and the average level was five with some reporting over 52.
- Adverse weather jumped to the top as the main cause of disruption around the world with 53% citing this, up from 29%; this was followed by unplanned IT and telecommunication outages and the failure of service provision by outsourcers, which jumped from 20% in 2009 to 35% in 2010.
- In terms of the impact of these disruptions, for 10% of companies the financial cost of supply chain disruptions was at least €500,000. 20% of companies suffered damage to their brand or reputation as a result of third party failures, and over 50% experienced a loss of productivity.
- 50% of respondents have tried to optimise their business through outsourcing, consolidating suppliers, adopting Just-In-Time or lean manufacturing techniques or have shifted production to low cost countries. Those choosing such options are more likely to experience supply chain disruption with 83% of those using low cost country solutions experiencing disruption, primarily due to transport network and supplier insolvency; whereas for JIT/lean manufacturing adverse weather is the main cause.
- 24 hours is the typical period within which businesses look to recover critical activities; sustained disruption beyond this period will cause significant economic and service delivery problems in many sectors. One week was generally the longest period that respondents had considered in their planning. Given this finding, it is a concern that 8% of respondents had not thought about supply chain in their BCM programmes.
- While few responding organizations faced sustainability issues in terms of disruption—defined here as environmental, health and safety, or business ethics issues—those that are exposed to such risks fared badly when problems did arise. They reported much higher levels of adverse media coverage and brand damage (37%) than others.
- For BCM practitioners, the survey shows that while many are starting out on supply chain BCM, and 24% have not started, good practice is developing in a number of areas especially in identifying key partners via Business Impact Analysis and focusing efforts on this group rather than looking at every supply chain and its constituent partners.
- Advanced programmes are also marked by looking for evidence of not just a BCP but a wider BCM programme, and its scope and relevance for the product or service that organizations are reliant upon.
- However, the immaturity of supply chain BCM is evidenced by 15% of respondents not reviewing their business continuity plan with key suppliers, 18% not seeking evidence of BCM arrangements, and 50% of respondents not looking to validate that key supplier business continuity plans would actually work in practice.
- The financial services sector was more advanced in its approach to supply chain BCM across all indicators, for example, checking the supplier has a BCM programme in place, its scope and relevancy to the product or service being purchased and, in the context of this report, more likely to validate plans. The financial services sector was also the highest user of outsourcing with 87%.
- The manufacturing sector counts adverse weather and product quality issues as major causes of supply chain disruption; and not surprisingly the sector features high (73%) use of JIT and lean manufacturing techniques. However, this sector is less likely to review supplier plans and 73% have not validated plans will work in practice. Higher levels of increased force majeure invocation are also noteworthy at 36% (compared with the survey average of 14%).
- In the government, education, health and social care cluster, almost 50% did not record supply chain disruption. Cyber attacks/threats scored the highest levels at 24% compared with the survey average of 10%. This cluster of sectors is more prone to adverse media coverage at twice the survey average. Costs of disruption, where given, are also much higher with a third of responding organizations citing costs of €100K-€500K. This sector is less likely to identify key suppliers, review or validate plans.
- In the retail sector, supply chain disruption is virtually guaranteed, with the highest levels seen of any sector (average of ten per year). Use of Just-in-Time techniques scored 100% and 83% use supplier consolidation techniques.
- There are geographical variations in terms of the causes of supply chain disruption. In Australia and New Zealand, energy scarcity and fires featured prominently, while health and safety incidents featured prominently among USA respondents. The UK had the highest levels of reported disruption with 83%, compared with the survey average of 72%. In the ASEAN+ cluster, civil unrest and environmental incidents featured more prominently, whereas in the Central & Latin America cluster, cyber threats and terrorism scored highly.
See Supply Chain Resilience 2010: Business Continuity Institute survey of resilience professionals.
About the Business Continuity Institute
Based in Caversham, United Kingdom, the Business Continuity Institute (BCI) was established in 1994 to promote the art and science of business continuity management and to assist organizations in preparing for and surviving minor and large-scale man-made and natural disasters. The Institute enables members to obtain guidance and support from their fellow practitioners, as well as offers professional training and certification programmes to disseminate and validate the highest standards of competence and ethics. It has over 5,000 members in more than 90 countries, active in an estimated 2,500 organizations in private, public and third sectors. For more information go to: www.thebci.org
