Getting to the Bottom of Supply Chain Disruptions: Causes, Industries, Impacts (Part 2)

Please click here for the first part of this analysis.

BCI's findings examining the leading cause of supply chain disruptions by sector are fascinating and should be required reading for executives tasks with mitigating and managing supply risk -- and may even help to justify reshuffling priorities in certain verticals. Consider in manufacturing, for example, "product quality incidents" were the leading cause of disruptions. Following product quality, "earthquake/tsunami" came in second as one of the top causes of supply chain disruptions for manufacturers. And "adverse weather -- windstorm, flooding, snow, etc." came in third. Given the current state of economic uncertainty in the EU over the debt issue and slowing to flat economies in the US and China, Spend Matters would forecast that supplier insolvencies would begin to show up on this list in the next 12 months.

Yet for now, this finding suggests that manufacturers should place a far greater premium on monitoring and tracking supplier performance management using either traditional supplier management and SPM specialist technologies or networked-based approaches like SAP Supplier InfoNet to tracking the same data across peer companies as well as their own. After all, D&B, BvD, Equifax, Cortera and other supply risk data focused on vendor financial stability won't help in the least when it comes to predicting quality incidents in the same manner as digging into core supplier performance metrics and trending. Given that the Japanese disaster and general weather trends impacts took the number two and number three spot for manufacturers, organizations would be well advised to layer on geospatial technology on a multi-tier level map to understand supply chain geographic concentration of suppliers against a backdrop of past weather and natural disaster problems. In supply chain risk, as we've said before, sometimes a picture can tell a thousand words.

For retail and wholesale companies, the top source impacting supply chain disruptions was "adverse weather," with "transport network disruptions" and "fire" taking second and third pace. Here, our recommendation to retailers would be similar to manufacturers in terms of understanding the multi-tier supply chain. But because the BCI report did not zero in on the cost of catastrophic disruptions by industry (e.g., those costing $5MM-$10MM or more in top or bottom line results to an organization), retailers should also be concerned with those outlier events focused on supplier practices and illegal part/ingredient substitution in certain markets (e.g., China) where shortcuts, fraud and other nefarious vendor practices continually make the headlines.

Stay tuned as our analysis of BCI's report continues.

Jason Busch

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