Over 70 Percent of Organizations Recorded at least One Supply Chain Disruption in 2010

Business Continuity Institute publishes supply chain failure research, finds that while awareness of supply chain risks is increasing, many businesses remain exposed to high levels of risk

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New York — October 29, 2010 — Over 70 percent of organizations recorded at least one supply chain disruption in 2010, and while awareness of supply chain risks is increasing, many businesses remain exposed to high levels of risk, according to a recent study by the Business Continuity Institute (BCI).

The BCI says that the survey research, covering 35 countries, also shows that outsourcing in IT and manufacturing often ultimately reduces cost-benefits through greater exposure to supply chain disruption. The survey looked into the impacts of the supply chain on business continuity.

Mother Nature remained the top risk to the supply chain. Adverse weather was the main cause of disruption around the world, with 53 percent citing of the respondents citing it as a factor, up from 29 percent last year.

Meanwhile, unplanned IT and telecommunication outages was the second most likely disruption, and the failure of service provision by outsourcers was third, up to 35 percent from 20 percent in 2009. These incidents led to a loss of productivity for over half of businesses.

The average number of identified supply chain risks in the past 12 months was five, with some organizations reporting over 52. In addition, 20 percent of companies admitted they had suffered damage to their brand or reputation as a result of supply chain disruptions.

Half (50 percent) of the survey respondents said they have tried to optimize their businesses through outsourcing, consolidating suppliers, and adopting just-in-time (JIT) or Lean manufacturing techniques.

Where businesses have shifted production to low-cost countries, they are significantly more likely to experience supply chain disruptions, with 83 percent experiencing disruption. The main causes were transport networks and supplier insolvency.

Only 7 percent had been fully successful in ensuring suppliers adopted business continuity management practices to meet their needs, with nearly a quarter not taking this step. Even when suppliers were regarded as key to their business, nearly half of respondents had not checked or validated their supplier's business continuity plans.

Twenty-four hours is the typical period within which businesses look to recover critical activities, since sustained disruption beyond this period is likely to cause significant economic and service delivery problems in many sectors. Very few organizations plan for disruption lasting longer than one week.

An executive summary of the report can be read here.