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Zurich: Company Profits Threatened Due to Overstretched Supply Chains

Source: Zurich

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Posted on 22 Jun 2009

More and more businesses are facing threats to their profitability because of an increased likelihood of needed supplies not arriving when planned, according to a new report published last week by Zurich Financial Services Group (Zurich).

Zurich's latest Risk Insight report The Strategic Risk Manager, highlights that the number of companies saying that supply chain disruptions have hit their profits has more than doubled in the last five years, while the number of countries considered to have “supply chain vulnerability” has risen by more than a third.

For a number of reasons, the challenges of managing a global supply chain are becoming increasingly complex. “As global markets have become increasingly competitive, many businesses have introduced cost-saving supply chain strategies to maintain profit margins, including sole sourcing and just-in-time deliveries of critical resources and components. With many organizations worldwide facing a major economic slump, some of these earlier savings are becoming operational weak links, especially in extended supply chains,” says Nick Wildgoose, global supply chain product manager for Zurich and the Editor of the report.

The increased risks facing businesses’ supply chains include suppliers going into receivership, suppliers’ financial problems meaning they are not able to deliver to the right quality or timescales, fraud, government intervention or embargo, strikes and natural disasters. These supply chain issues are a risk not only to the profitability of companies but also to their reputation with customers, investors, policy-makers and the general public.

As a result, the role of the risk manager in assessing potential vulnerabilities is becoming more and more important. “With due diligence, risk managers can influence decisions made within individual functional areas responsible for different elements of the supply chain,” says Zurich’s Nick Wildgoose.

Zurich has produced a “Supply Chain Healthcheck” for companies to assess the level of risk they are facing. Among the most important issues are:

* Do you know who your critical suppliers are and how much their failure would harm your company’s profits?

* Do you have a complete picture of your critical supply chains from raw material to customer?

* Do you have routine systems for measuring the financial stability of your suppliers?

* Do you understand how natural disasters could impact your key production facilities and distribution centers?

* Have you provided risk training to your supply chain management team?


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