Your Reputation is Only As Good As Your Weakest Link

Is there a weak link in your supply chain?
The cost of failure is very high these days. Increasingly difficult to control supply chains cause great pains for companies and even bring on failures.

Risk management association, Airmic, asserts that firms outsource more than just production, they outsource their actual reputation. If companies do not understand how suppliers operate, or do not have adequate risk management strategies in place, they’re at risk in this global economy.

Could a weak link in your supply chain disrupt your business?

The need to acquire components from many different sources increases vulnerability to supply chain failure. If not properly represented during supply chain configuration, Paul Hopkin, Airmic technical director said that supply chains can be set up with “mind-boggling complexity and business models that no one properly understands” in order to cut costs. Can a weak link in your supply chain disrupt your business? Consider the speed with which information traveled about the Burger King horse meat scandal. Luckily BK is big enough to recover from such a public relations disaster, but your company may not be.

Losses Attributed to Supply Chain Malfunction

Lockton and Allianz Global Corporate & Specialty reported that businesses frequently have taken inadequate measures to protect their supply chains, that failures have become common. Probably most firms are ill-prepared to respond. A Business Continuity Institute survey in 2011 reported that only 8% of respondents could confirm that all key suppliers had programs in place to deal with disruptions. The Lockton and Allianz Global Corporate & Specialty report found that economic losses from supply chain breakage are estimated to have increased between 2009 and 2011 by as much as 465%. They identified seven underlying factors present when supply chains break:

  1. off-shoring,
  2. increasing complexity,
  3. cost pressures,
  4. geographic clustering,
  5. modern communication,
  6. modern production methods, and
  7. increasing dependency.

Other findings in the report concluded that supply chain disruptions are estimated to cause an average of a 10% reduction in sales and shareholder value.

Suppliers Cause Supply Chain Breaks

Unplanned outages of IT and telecommunications at suppliers is the main cause of supply chain disruption. Weather is the second leading cause, and outsourcers’ failure to provide services is third.

Handling Supply Chains Successfully

It is essential to take an enterprise-wide approach to business continuity and risk management. Consider all factors and locations, and how they interact.

Call Contec about your parts and products.

Posted on: Posted in: Supply Chain Management