Today and in recent years, organizations have increasingly focused on business continuity plans, arrangements, and exercises. At least, nearly three-quarters of organizations reported having business continuity strategies related to supply chain management, according to a report published by the Business Continuity Institute (BCI), supported by Zurich Insurance Group .
The report showed that organizations with business continuity arrangements are eight times more likely to report greater supply chain visibility, twice more likely to insure for supply chain losses, and three times more likely to display top management commitment. This last piece, corner office support, is important for the cross-functional support required to achieve improvement in supply chain resilience, according to Nick Wildgoose, global supply chain product leader for Zurich Insurance Group.
“Once you have the support of top management, which is often driven by a realization of the financial exposure to critical suppliers, then it helps the other activities,” Wildgoose told EBN.
What’s more, the report found that 74% of organizations ask their key suppliers about their business continuity arrangements; an increase from last year’s 63%. This behavior coincides with other areas of good practice, especially organization-wide reporting of disruption, which increases supply chain visibility.
“Technology solutions in this area have only just started to emerge in recent years, with the software as a service model, big data, and artificial intelligence coming into place at a more cost-effective level,” said Wildgoose. Organizations that make use of Excel spreadsheets and are concerned about sharing critical supplier data on third-party platforms often succumb to an element of inertia, he said.
Today, a variety of technology and big data are available to overcome skills and resources gaps in supply chain management. Unfortunately, the report shows that 63% of organizations do not use any technology to analyze, track, and monitor the performance of their supply chains.
Tech is not the only underused tool in the supply chain arsenal, though. The report highlights an increase in availability of insurance products against supply chain losses in the market. However, it showed that 51% organizations still do not insure against supply chain disruption at all. Too often, organizations are unaware of the innovative risk transfer solutions offered by insurance companies. These new insurance vehicles look at protection against named suppliers and supplies damage and non-damage events.
To effectively achieve resiliency, organizations should understand the cause and impact of disruptions. The report outlined them:
- Top causes of supply chain disruption: Unplanned ICT and telecommunication outage, cyber-attack and data breach, and loss of talent and/or skills. Fire is the biggest increase this year in terms of threats to supply chain, jumping from 14th last year to the 7th biggest cause of disruption this year. On the other hand, terrorist acts and currency volatility have dropped out of the top ten.
- Impacts and/or consequences of disruption: Loss of productivity (55%), increased cost of working (46%), and customer complaints remain as the top three impacts of supply chain disruptions.
- Economic impacts of disruption: More respondents (53%) reported losses for less than 50,000 euros compared to last year (33%). However, losses of more than one million euros have decreased from 34% to 22%.
The report highlights reputation and collaboration as two other important aspects in supply chain resilience. Recognizing the hit that a supply chain disaster can have on corporate reputation informs the need for organizations to become more aware of issues around their supply chain and to focus on communicating effectively in times of crisis.
Meanwhile, many firms still falter in the area of collaboration. “Internally speaking, this is because of the relative lack of top management commitment,” Wildgoose said. “Collaboration with critical suppliers requires the right level of trust that’s not easily achieved.”
Does your organization rely more heavily on technology or insurance to achieve resilience? How has it changed? Let us know in the comments section below.