Report Focuses on Supply Chain Challenges
Companies are finding it increasingly difficult to control their supply chains at a time when the cost of failure is higher than ever, according to the UK risk management association Airmic. Firms are outsourcing not just production but also their reputation to suppliers without understanding how they operate or having adequate risk management strategies in place.
Speaking at the publication of a report on supply chain failure sponsored by Lockton and Allianz Global Corporate & Specialty, Airmic’s technical director Paul Hopkin said: “The relentless pressure to cut prices has led to the creation of supply chains of mind-boggling complexity and business models that no one properly understands. When you consider the speed with which information travels, boards should not be surprised when public relations disasters such as the horsemeat scandal take place.” Earlier this year, some UK supermarkets hastily cleared their shelves of certain products found to contain horsemeat.
The report, entitled ‘Supply Chain Failures: A study of the nature, causes and complexity of supply chain disruptions’, was prepared for Airmic by Dr Alan Punter, who notes that economic losses from supply chain disruptions are estimated to have increased 465% between 2009 and 2011.
The report finds that businesses frequently have taken inadequate measures to protect their supply chains, that failures have become common and that many firms are ill-prepared to respond to them. It identified seven underlying factors that tend to be present whenever supply chains go wrong: