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Oct 27
2010

Supply chain risks grow

Posted by dbedell in supply chain disruptionsupply chainRiskoutsourcingmanufacturingITCash

dbedell

Companies worldwide are struggling to come to grips with risks and disruptions in their supply chain, according to a survey by the Business Continuity Institute, which found that more than 70 percent of companies had a supply chain breakdown in the past year.

In addition, a significant piece of that disruption arose from outsourced IT and manufacturing processes – and the risk of supply chain disruption related to outsourcing is rising.

The report found that companies averaged a whopping five supply chain disruptions in the past year, and some companies reported as many as 50 or more interruptions.

Plus, disruptions cost companies anywhere from thousands to hundreds of thousands of dollars in lost revenue, and a fifth of companies surveyed said that it had also resulted in brand or reputation damage.

The big drivers of supply chain disruption for survey respondents were weather and issues in outsourced relationships. Half of respondents that were using some sort of outsourcing, supplier consolidation, lean or Just-In-Time manufacturing techniques in order to reduce supply chain costs.

Of those that moved production to low-cost countries, the survey found that 83 percent saw some sort of supply chain disruption, generally from transportation issues or supplier insolvency. For those using outsourcing specifically, 35 percent experienced disruption or service failure at some point during the past 12 months. This was up from 20 percent in the preceding year.

Said David Noble, Chief Executive Officer of the Chartered Institute of Purchasing & Supply (CIPS): “Supply chain disruptions have a hugely negative impact on business and can wreak havoc, not just to the bottom line, but in terms of reputational damage.”

Given the critical significance of ensuring smooth functioning throughout the supply chain, companies need to ensure that they are actively managing and mitigating risk both internally and with external suppliers and outsourcing partners. Otherwise, the risk of losses from supply chain disruptions could undermine any benefits that are gleaned through improving process efficiency. 

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