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Carriers Seek to Lower Disruption Costs

Source: INN - Pat Speer

Posted on 02 Dec 2011

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Commercial lines carriers focused on risk mitigation tied to business continuity have reason for additional concern. According to a newly published survey, 85 percent of companies reported at least one supply chain disruption over the last 12 months, with 40 percent of analyzed disruption originating below the immediate supplier. The survey, sponsored by Zurich Financial Services Group (Zurich) and conducted by the Business Continuity Institute (BCI) Caversham, United Kingdom, queried companies from across 62 countries.

Now in its third year, the survey emphasizes the need for a higher priority to be assigned to developing resilient supply chains in the face of systemic vulnerabilities and unpredictable disruptive events, notes BCI.

Further findings include:

• A full 51 percent of respondents cited adverse weather as the main cause of disruption, mirroring its prominence from the 2010 report.

• Unplanned IT and telecommunication outages was the second most-likely disruption, affecting 41 percent of company respondents.

• The third source of disruption, according to the report, was cyber attack, which increased in prominence over last year.

• Productivity was negatively affected for almost half of businesses due to supply chain incidents, with increases to figures relaying the cost of working (38 percent) and loss of revenue (32 percent).
•Shareholder concern (19 percent), damage to reputation (17 percent), and expected increases in regulatory scrutiny (11 percent) round out the

longer term consequences of disruption in the supply chain, note the survey results.

• For 17 percent of respondents, the financial costs of the largest single incident totaled a million or more Euros. This figure almost doubles to 32 percent where less-resilient supply chains are evident in the research.

• Loss of talent or skills, an HR disruption, rose from from 14th place in 2010 to sixth place in 2011. This represents a warning that lay-offs among supply chain partners is leading to increased disruption, said the report.

• 74 percent of respondents either strongly agreed or somewhat agreed with the proposition that outsourcing and just-in-time/lean strategies were making their organizations more vulnerable to supply chain disruption.

Nick Wildgoose, global supply chain product manager at Zurich Global Corporate, framed the survey results: “At Zurich, we are finding that an increasing number of our customers are realizing that they can reduce costs of disruption and gain competitive advantage by understanding their critical supply chains' risks better,”

The survey report, which is also supported by the Chartered Institute of Purchasing & Supply and DHL Supply Chain, maintains that effective management of supply chain continuity is critical not just because of the immediate costs of disruption, but also due to the longer term consequences to stakeholder confidence and reputation that may arise following a supply chain failure.