Deloitte published findings on the cost and effectiveness of Supply Chain Risk Programs. The results are harsh. A single supply chain disruption made public will lower shareholder returns 30% or more. (1)
Of the organizations surveyed, two-thirds have a current supply chain risk program, but only one-half of them reportedthe program was very effective. (1)
85% of organizations with global supply chains have experienced at least one major supply chain disruption in the previous 12 months. For publicly announced disruptions, this resulted in the aforementioned 30% lower shareholder returns. (2)
With shareholders facing such steep drops in return on investment from a single supply disruption, why are only one-half of these supply chain programs effective?
Companies reported that they simply lacked the tools or know-how to effectively implement their supply chain programs internally.
Most alarming is that the #2 most cited costly outcome was direct supplier disruption. In other words, the supply chain incident is likely to be the direct result of the direct supplier themselves, not an internal direct failure of the organization's supply chain program. (see footnote for graph source below)
Unreliable suppliers, or suppliers who cannot recover from a supply chain loss quickly can cause enormous financial risks for your organization.
Carefully screening supplier's safety records, insurance coverage and financial health is the most important step of any Supply Chain Risk Management Program.
(1) http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Consulting/us_consulting_therippleeffect_041213.pdf
(2) “Supply Chain Resilience 2011.” Business Continuity Institute, November 2011
