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Industry insight and commentary that addresses supply chain issues

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Common Supply Chain Threats—And How to Minimize Them

Posted by Patrice Farrell on Feb 10, 2016 11:19:07 AM

Global supply chains continue to grow in complexity, but even with recent high-profile security breaches and logistics slowdowns, two new studies suggest many businesses may be underestimating supply chain threats. A recent study suggests one common threat, the loss of a key supplier, is effectively shrugged off by a surprising percentage of businesses surveyed. Zurich Insurance Ltd.’s global survey report on the potential business impact of “loss of the main supplier” for small and medium enterprises demonstrates that a majority of organizations (55%) claim they would not be affected at all were they to lose their main supplier.

A separate study by Zurich Insurance and the Business Continuity Institute examines supply chain disruptions, their causes and their consequences. According to the report, 74% of organizations experienced at least one supply chain disruption in the previous year. Contrary to the opinions found in the Zurich report, the responses to the Zurich/BCI survey show that 50% of supply chain disruptions originated from an immediate supplier.

The top ranking consequences of supply chain disruption include impaired service outcomes, revenue loss, increased cost of working, customer complaints and, most commonly reported (58%), loss of productivity. The cost of these disruptions can be staggering. Fourteen percent of respondents claim losses of at least one million euro ($1.1 million USD) from supply chain disruption costs estimated from loss of revenue and increased cost of working.

A quick look at the results shows that more organizations are reporting “non-physical disruption” in the supply chain, identifying unplanned IT or telecommunications outages and cyber attacks and data breaches as the top two causes of disruption. Product quality incidents are another top ten cause of disruption in the supply chain. A unifying theme in the types of disruption experienced is supply chain visibility, or the lack thereof.

A lack of supply chain visibility is a recurrent issue highlighted by the report. The issue persists this year, with 72% of organizations lacking firm-wide supply chain incident reporting. According to the authors, “these findings underscore the need for top leadership to get involved and drive changes that improve the visibility of supply chain incidents across the organization.” However, when 15% of organizations claim at least a quarter of disruptions come from their external inbound supply chain—and 13% don’t know the proportion of disruptions originating from suppliers—those results indicate a lack of visibility not only internally, but along the extended supply chain.

Among its conclusions, the report states the following:

The data shows the complex nature of supply chains with many organizations relying on a growing number of key suppliers. Disruptions continue to occur at lower levels, which may induce severe knock-on effects to organizations at the end of the supply chains. It is therefore important for organizations to focus on reporting disruption firm-wide and increase supplier visibility.

Reducing or preventing supply chain losses and disruptions is a compelling reason to introduce visibility across the extended supply chain, but how is such a feat accomplished? A cloud-based inventory management solution offers a number of advantages—especially for SMBs. A cloud deployment can reduce the strain on IT resources by deploying rapidly without the costs of purchasing or managing on-premise servers.

DSI’s® Cloud Inventory™ secures data in motion and at rest and offers a controlled environment in which to share inventory information with key trading partners. By opening the lines of communication with key players in your supply chain, you can better anticipate changes or shortages and respond quickly. And with cloud-enabled analytics, you can access dashboards for real-time insights into supply chain performance so you don’t ever have to say you don’t know where disruptions originate.

Whether your organization is a small business or a large enterprise, threats to the supply chain can have a serious impact on your business operations—and revenue. Contact us to learn more about how end-to-end visibility can reduce disruptions and common threats in your supply chain.

Topics: digital supply chain, DSI cloud inventory™, inventory management, supply chain, Supply Chain Management

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