From The Wall Street Journal , Published on 30 November 2015
Many small- and medium-sized businesses lack visibility in their supply chains and are underestimating the risk of disruptions, according to two new studies.
According to Zurich Insurance Ltd.’s global survey, 55% of these businesses reported that they would not be affected at all if they were to lose their main supplier. The company polled businesses with 250 employees or fewer.
In a separate study, conducted by Zurich and the Business Continuity Institute, nearly one in ten businesses could not identify their key suppliers, and 70% lacked visibility over their entire supply chain.
The BCI/Zurich report also found that 74% of companies worldwide had suffered a supplier-related disruption in the past year, and 14% had experienced losses of more than $1.1 million as a result.
“There’s a lot of education that needs to happen,” said Linda Conrad, director of strategic business risk with Zurich. “The smallest firms are the least prepared to think about backup plans.”
The top three most common supply chain disruptions are unplanned IT outages, cyber-attacks and weather-related delays, Zurich and BCI found. But often, transportation complications result in significant losses for businesses. The West Coast port slowdown that started in late 2014, for example, forced some shippers to incur more than three times the usual costs of transporting goods.
“In the case of the port's slowdown, people were having to fly stuff in or shift to different ports, which could cost a lot more,” Ms. Conrad said. Small companies “don’t have the cash flow cushion to prepare for these things.”
Most financial losses from supply chain disruptions come from having to scramble to find alternative plans, which can be costly. Other losses are the result of damage to a firm’s reputation, which can cause suppliers to lose clients, Ms. Conrad said. Zurich found that less than 10% of companies globally even have “continuity plans” with their suppliers, which often specify another vendor who can provide the same components or services as the original supplier, or a detailed plan for avoiding disruptions by shifting to a different factory or shipping route.
For more information regarding supply chain management, please refer to the following links:
Judging by the Cover: The Importance of Sustainable Packaging
Sustainability in the Supply Chain
Sustainability in the Business World
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