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Supply chain resilience – where are we heading in 2020?

At a glance

  • The latest edition of the Business Continuity Institute’s (BCI) Supply Chain Resilience Report now in its eleventh year
  • Ian McNeil, our Global Head of Customer Management, Risk Engineering, provided a foreword in this edition on his thoughts on the risk of supply chain disruption
  • One of the most encouraging findings in the 2019 report is that the number of organisations suffering more than five disruptions fell by a third to 10%

This article counts towards accumulating your annual CII CPD structured learning hours for Business Interruption.

By reading this article, and correctly answering the three questions underneath, you will have achieved the following learning outcome: Summarise the key components of a business continuity plan and/or the benefits of supply chain risk management.

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The latest edition of the Business Continuity Institute’s (BCI) Supply Chain Resilience Report (2019) now in its eleventh year, noted that in the results of the 2019 survey that over three quarters of organisations record, measure and report on supply chain disruptions.

Zurich supports the survey each year, and Ian McNeil, our Global Head of Customer Management, Risk Engineering, provided a foreword in this edition on his thoughts on the risk of supply chain disruption.

“The risk of supply chain disruption has become one of the most fundamental risks that organisations face across virtually all sectors. In today’s increasingly complex business environment, in-depth knowledge of your supply chain and being able to map and understand your interdependencies across your primary, secondary and even tertiary level suppliers is key to keeping your business operational, maintaining profitability and keeping your reputation intact.

“One trend noted this year is that whilst organisations are getting better at managing disruptions in their “close to home” tier 1 suppliers, due diligence further down the supply chain is slipping. Although there is increasing awareness of supply chain risk, in all likelihood very few organisations have the level of information that enables them to drill down into level 2 and 3 suppliers or may not have even thought about it to any great extent.

“This year’s report also introduces a new section which looks at the front of mind concerns for supply chain professionals on the horizon over the next five years. Here, geopolitical concerns such as civil unrest and political change dominate. However, this is a disconnect to what has actually been the main sources of disruption this year, namely IT and telecoms outage and adverse weather have been the top two causes of supply chain issues.”

Supply Chain Resilience Report 2019 – the key findings

Among the eye-catching statistics from the BCI’s latest survey were the following:

  • Less than a quarter (23%) of organisations now report that their organisation does not record, measure and report on supply chain disruptions – the lowest figure since Business Continuity Institute’s (BCI) Supply Chain Resilience Report has been published
  • Unplanned IT and telecommunications outages accounted for 44% of disruptions in 2019
  • Despite cyber-attack and data breach only causing 26% of disruptions in the past year, it is the most top-of-mind disruption for professionals over the next year with 62% of it rating it as their primary concern
  • 52% of organisations experienced supply chain disruption in 2019 compared to 57% in 2018
  • Incidents involving tier 1 suppliers fell below 50% for the first time since 2016 (49%) although incidents in tiers 2, 3 and beyond saw a small percentage increase
  • 45% of organisations that experienced supply chain disruptions were unable to quantify how much of those losses were insured.

Improving levels of reporting

Non-reporting of supply chain disruptions is at its lowest level since the Business Continuity Institute’s (BCI) Supply Chain Resilience Report has been published. Only 23% of organisations report that their organisation does not record, measure and report on supply chain disruptions.

Whilst this remains a positive trend, concerns are still apparent, as over 51% of organisations are only reporting within certain departments/functions. This is an increase from the 43% seen in 2018.

With the increasing complexity of supply chains, it remains as important as ever that organisations record, measure and report on any disruptions they receive within their supply chains.

Frequency and origin of supply chain disruption

One of the most encouraging findings in the 2019 report is that the number of organisations suffering more than five disruptions fell by a third to 10%.

For the first time since 2016 incidents with immediate suppliers fell below 50%. However, both tier 2 and 3 incidents rose to 25% and 12% respectively. This indicates that organisations are more proficient at managing incidents with their immediate suppliers, but that incidents deeper into the supply chain remain a concern.

Another concern is that nearly a third of organisations do not analyse the source of their disruption. Supply chain complexity is increasing and organisations need to look beyond their tier 1 and 2 suppliers, to assess their tier 3 and beyond suppliers for those deemed most critical.

Causes and consequences

IT and telecoms outages remain the primary cause of supply chain disruption, with civil unrest and political change leaping up the list.

Adverse weather saw a slight drop, however, it still accounted for over a third of organisations supply chain disruptions. With climate change continuing to dominate both domestic and global markets and politics, this remains a key risk for ever increasing global supply chains.

Cyber-attacks and data breaches are the leading cause of concern for organisations over the next 12 months. Whilst world economic events continue to put pressure on supply chains. The global trade war, continuing uncertainty over Brexit and increasing environmental concerns all impact supply chains.

Image © Getty

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