The recent superstorm, Sandy, and the Nor’easter that followed one week later, are continual reminders that businesses need to build redundancies and create business continuity plans for services and infrastructure. Not only do outages have immediate impact to operations, they also significantly impact supply chains. In fact, a recent study led by global multi-line insurance provider The survey, in its fourth year and also supported by the Chartered Institute of Purchasing & Supply (CIPS) and DHL Supply Chain, was conducted during the summer of 2012 and queried 532 organizations from across 68 countries and 14 industry sectors that are BCI members, as well as members belonging to the Chartered Institute of Purchasing & Supply. BCI is a member-driven organization established in 1994 to promote the art and science of business continuity management and to assist organizations in preparing for and surviving minor and large-scale man-made and natural disasters. It has over 8,000 members in more than 100 countries, who are active in an estimated 2,500 organisations in private, public and third sectors. CIPS is a global member organization serving the procurement and supply profession.
The survey found that 52 percent of organizations surveyed said they experienced some or high impact disruption as a result of an unplanned IT or telecom outage. In second place were disruptions by adverse weather, experienced by 48 percent of the firms surveyed.
Service issues attributed to outsourcing jumped to third place in the causes of supply chain disruption at 35 percent, up from 17% in 2011, highlighting the importance that outsourcing decisions have in supply chain resilience. The survey also showed that 73 percent of organizations recorded at least one supply chain disruption in 2012.
The survey also found that disruptions have serious consequences. The financial costs of disruptions were higher than in 2011, with one in five companies registering a single incident loss of more than $1.27 million (or €1 million). Among those surveyed, 59 percent said loss of productivity was the primary impact of the disruption experienced, up from 49 percent in 2011. The organizations queried still have plenty of work to do in shoring up their supply chain operations. In fact, one quarter of the respondents have yet to consider supply chain disruption as part of their business continuity programs. Forty-four percent of respondents said they have weak supply chains. The United Kingdom leads the United States in considering supply chain disruption within continuity programs, with 75 percent doing so in the United Kingdom compared to only 44 percent of U.S.-based respondents.
In a prepared statement, Nick Wildgoose, Global Supply Chain Product Manager at Zurich’s Global Corporate, said the survey has consistently shown that more than 70 percent of respondents suffered significant supply chain disruptions. “In the latest survey, the costs associated with just a single incident are in over 20% of cases in excess of 1m Euros rising to 100m Euros. It is therefore critical, especially in the current economic climate, that organizations invest the right amount in their supply chain due diligence and risk management treatment. This should include organizations setting out robust business continuity plans that include consideration of dependency on key suppliers and customers. These plans need to consider what should be needs to put in place prior to the disruption event taking place , what can be done while it is in progress and the improvement lessons post the event. There are a number of encouraging aspects to the survey including the benefit that organizations have got out of carrying out joint business continuity exercises with their suppliers,” Wildgoose said.