Business executives are not evolving to keep ahead of thecomplex and increasing risks across their global supply chains, aZurich survey finds.
|In its fifth annual Supply Chain Resilience Survey released this month,Zurich polled 519 members of the Business ContinuityInstitute—including risk and supply-chain managers, and businesscontinuity, security and emergency-planning professionals—abouttheir response to the challenge of running smooth global businessoperations.
|The survey finds that three-quarters of business specialists donot have a clear understanding of their organization's supply-chaindisruption experiences, and only a quarter are coordinating andreporting across their enterprise to gain it. Moreover, 50% sayhalf or more of their suppliers do not have abusiness-continuity plan in place.
|This level of unpreparedness has remained unchanged from2012.
|"Results in 2013 continue to indicate a passive approach toreviewing the likely effectiveness of supplier business-continuityarrangements," states the report, which goes on to say thatsupply-chain resilience is a complicated issue that is "not justabout continuity."
|While supply-chain disruptions are increasing—over the past fouryears, 75% of respondents annually experienced at least oneincident—they are also occurring further inside the supplychain. Forty-two percent of businessinterruptions originated below the tier-one supplier (supplyingparts to the manufacturer of the final product) in 2013.
|The top-three causes of disruption occurred from unplanned IT ortelecommunications outages, followed by adverse weather (40%) andservice failure by outsourced providers (37%).
|However, non-physical causes of interruption (that don't deterthe immediate supply of a product or service but require crisisresponse to stakeholders or longer-term damage) made an impactfulappearance: high-profile media reporting of the danger of cyberattacks rose from 18th place in 2012 to 5th placein 2013, and the non-availability of loss of talent increased from10th place to 6th.
|Forty-one percent of respondents stated that customercomplaints received after a disruption increased since2012, placing it second behind loss ofproductivity as the primary consequence of supply-chaindisruption. Twenty-four percent experiencedreputational damage to their brand, but only 3% said it caused afall in share price.
|"Different parts of the organization need the supply chain todeliver different and potentially conflicting outcomes," saysZurich.
|The report recommends several steps to reconcile enterprise-widegaps in supply chain planning:
- Asking suppliers whether they have activated their BC planswith previous clients, and report their results.
- Asking suppliers how they identify their own 'criticalsuppliers' and what due diligence they undertake with them.
- Ensuring the vendor has a BC program and plan, the business hasrecovery capability built into their BCPs for reduced services inthe event of a supplier being impacted, as well as contingencyplans owned and developed by the business to cover total loss of amaterial supplier.
- Understanding the risk appetite of the directors of thesupplier, which can be a guide as to whether the organization takesresilience seriously and their responsibility to their customers'continuity.
- Categorizing disruptive and financially significant suppliersand conducting annual due diligence and regular meetings with theseparties.
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