Getting to the Bottom of Supply Chain Disruptions: Causes, Industries, Impacts (Part 1)

The Business Continuity Institute (BCI) recently published its third annual report examining a range of causes, industries and impacts of supply chain disruptions across the globe. Their report, which can be downloaded for free by clicking this link and registering, is a great piece of primary research for anyone interested in building a business case to invest in the area of supply chain risk management in their own organization. Even though it was published just a week ago, much has already been written in the popular press about some of the higher-level findings in the report's press release -- 85% of respondents recorded at least one supply chain disruption in 2011 (so far), 40% of disruptions occurred on the multi-tier level, 51% of respondents cited adverse weather as the main cause of disruption, cyber attack is not a top three source of disruption in certain sectors, etc. But the real value of the report comes from what didn't make the headlines. Sometimes you just need to read these things for yourself!

Looking at the details, only 15% of respondents (out of over 500) suggested that they did not suffer from a supply chain outage thus far this year. Although weather took first price as the top source of disruptions on supply chains, many other factors also contribute at material levels as top drivers. These include: unplanned outage of IT or telecommunications systems (41%), transport network disruptions (21%), earthquake/tsunami (21%), failure in service provision by an outsourcers (21%), loss of talent/skills (16%), product quality incident (15%), volcanic ash cloud (13%), supplier/vendor insolvency (11%) and civil unrest/conflict (10%). Cyber attacks, fire and industrial disputes all made the list at or around 10% as well. The shocking finding here for those deep into the supply risk area is how far down insolvency is on the list given how much emphasis we tend to place from a supply chain risk management mitigation angle on this area.

We were also surprised to learn how frequently supply disruptions occurred in services industries or due to problems not pertaining to the material supply chain involving the production, warehousing, transportation or sales of physical goods. Considering that 41% of respondents cited "unplanned outage of IT or telecommunications equipment" and 21% cited "failure in service provision by an outsourcer" as major causes of disruptions, it's clear that supply risk management efforts within manufacturing organizations should still include efforts to consider these softer areas typically not associated with the type of supply risk we think that can impact quality or shut down a line.

Stay tuned as our analysis of this report continues.

Jason Busch