Getting to the Bottom of Supply Chain Disruptions: Causes, Industries, Impacts (Part 4)

Click here for Part 1, Part 2, and Part 3 in this series.

Perhaps the most predictable of all of the industries in terms of the leading sources of supply chain disruption in the latest BCI research study are transportation and storage companies. For these organizations, it's no surprise that "adverse weather (windstorm, flooding, snow, etc.)" tops the list as the leading cause of disruption. "Unplanned outage of IT or telecom systems" takes second and "industrial disputes" come in at third. At least in the US, a fourth factor to consider might be border delays across US and Mexico (and in certain cases, though on a more limited basis, Canada), although one could argue that logistics companies and manufacturers plan for such delays. Still, if there is a surprising item on this for logistics companies it's the danger of not over investing in either an internal or a third party's IT and communications infrastructure.

For governments -- one assumes Federal, state and local or their country-specific equivalents -- the most frequent cause of supply chain disruption is "adverse weather." This is followed by "unplanned IT or telecom system outage" and failure in service provision by an outsourcer. It's a bit ironic that governments would be the only sector in the entire study who would be most impacted by failing to adequately plan for outsourcing failures by managing providers more directly and effectively -- and creating contracts that hold them accountable for downtown. But regardless, BCI's findings in this area provide useful warning for all of us to consider the supply risk posed by services providers as much as manufacturers, even in the virtual goods supply chain.

When organizations suffer supply chain disruptions, they face a number of consequences as a result. BCI found that the leading result of supply disruptions is "organizational loss of productivity," with 49% of respondents suggesting they were less productive as a result (e.g., by having to shut down a line). "Increased cost of working" came in second at 38% (for perhaps similar reasons to the top response) and "loss of revenue" was tied with "customer complaints received" and "service outcomes impaired" for third with 32% of respondents saying they faced these consequences from disruptions. Further down the list were such consequences as "stakeholder/shareholder concerns" at 19% and "delayed cash flows" at 18%. Curiously, when looking at these top consequences, what stands out the most is that the direct financial impact of supply chain loss appears to came in second to more indirect impacts on cost. In other words, more intangible consequences matter just as much as the hard dollar savings and loss ones that we can be quantify in minutes.

Jason Busch

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