Business executives are not evolving to keep ahead of the complex and increasing risks across their global supply chains, a Zurich survey finds.

In its fifth annual Supply Chain Resilience Survey released this month, Zurich polled 519 members of the Business Continuity Institute—including risk and supply-chain managers, and business continuity, security and emergency-planning professionals—about their response to the challenge of running smooth global business operations.

The survey finds that three-quarters of business specialists do not have a clear understanding of their organization's supply-chain disruption experiences, and only a quarter are coordinating and reporting across their enterprise to gain it. Moreover, 50% say half or more of their suppliers do not have a business-continuity plan in place.

This level of unpreparedness has remained unchanged from 2012.

“Results in 2013 continue to indicate a passive approach to reviewing the likely effectiveness of supplier business-continuity arrangements,” states the report, which goes on to say that supply-chain resilience is a complicated issue that is “not just about continuity.”

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, which 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.

Special Reports /

Survey: Most Businesses Unprepared for Increasing Supply-Chain Risks

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