Technology poses the biggest risk to businesses’ supply chains over the next 12 months, according to a report. 

In a survey of over 500 business continuity professionals from 71 countries by Zurich, 75% of respondents reported that they did not have full visibility of their supply chain and that 30% did not know where they fit into any of their suppliers’ priorities. Only 12% knew where they fit into all of their suppliers’ priorities.

Business continuity insurance is not just an insurance policy against an unlikely event, said the report. The potential for an ‘incident’ was demonstrated by 75% of respondents recording at least one supply chain disruption during 2012 with 42% of this disruption originating below the immediate supplier. The cost of this is clear as 15% experienced an annual loss in excess of €1 million while 9% experienced a single event that resulted in a loss in excess of €1 million. The key issue for those in the industry is that 62% of respondents felt that top management commitment to managing the supply chain is inconsistent or totally lacking.

Supported by Zurich and also by the Chartered Institute of Purchasing and Supply (CIPS), the report concludes that disruptions continue to have a significant impact on business performance and that the problem is not being effectively managed. One of the key challenges is to get consistent top management support for investing in improved supply chain resilience. Disruptions are not a matter of ‘if’ but ‘when’, so effectively tracking the entire supply chain is essential for reducing the immediate costs of disruption and managing the long term reputation of the business.

Further findings from the report include:

  • The leading impact following a disruption is loss of productivity with 55% experiencing this in the last year. 41% reported customer complaints and 33% experienced an increased cost of work and service outcome impaired
  • The biggest risk to the supply chain over the next 12 months was reported to be technology (23%) followed by regulations (17%)
  • The leading cause of supply chain disruption is unplanned IT or telecom outages with 55% of organizations surveyed experiencing some or high impact disruption as a result, followed in second place by adverse weather, experienced by 41% of firms, then outsourcer service failure at 37%
  • 49% of respondents state that half or less of their key suppliers have business continuity arrangements in place for their own needs

Nick Wildgoose, Global Supply Chain Product Manager at Zurich, commented: “It is clear from the results of the latest study that supply chain disruptions continue to have a significant impact on business performance. One of the key challenges is to get consistent top management support for investing in improved supply chain resilience. As a starting point it can be useful to look at your most profitable product or service and look at the profit impact of related supplier failure on your organization. This should get you some attention.”