Nick Wildgoose, global supply chain product leader, Zurich Insurance Group, examines the steps companies should take to improve supply chain resilience
Supply chain risks can be viewed from several angles. You may be a supplier responsible for a critical component of another company’s final product, or you could be the final producer relying on third parties for components. Either way, understanding your supply chain and how you fit into others is becoming increasingly important for risk managers.
Most companies are seeking to reduce costs and improve working capital management, while at the same time they are more reliant on their suppliers. This reliance is likely to involve a combination of global sourcing, single sourcing, partnership approach and just-in-time operations. Paradoxically, the actions taken to drive down costs are likely to drive risk into the supply chain. In Asia – including companies operating in Thailand – these decisions are being taken against a background of increased market shortages and complexities within supply chains.
The impact supply-chain disruptions can have on company performance can be great. PwC’s analysis of 600 US companies from 1998 to 2007, for example, found that companies that had suffered a supply chain disruption suffered a significant fall in their share price compared with a benchmark group. A Business Continuity Institute survey conducted in October 2012 indicated that about 73% of companies had had a supply-chain disruption over the previous 12 months. Many had experienced multiple disruptions over the same period.
Supply chains affect every part of a business. As people are one of the fundamental aspects to the operation of any supply chain, it is critical that an appropriate risk culture is put in place. You also need to consider the physical, financial and information flows associated with the associated supply chain.
With the increased globalisation of the world’s economy and ever-growing reliance on suppliers, it is highly likely that every business will experience a supply-chain interruption at some time. There are several steps that companies can take to improve their supply chain understanding and resilience. These include:
1 understanding your profit exposure to critical suppliers;
2 mapping out key supply chains to start to understand key interdependencies;
3 ensuring you have in place appropriate due diligence and business continuity plans; and
4 having appropriate supplier management in place.
Zurich has tools and techniques that can help you in this improvement of your supply chain resilience.