6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

One in four businesses exceed ‎US$1 million in losses, but almost half of survey respondents in Asia Pacific did not insure their losses.

Zurich Insurance has revealed the key Asia Pacific findings of the Business Continuity Institute (BCI) “Supply Chain Resilience Report 2016”. Despite six out of ten organisations experiencing at least one supply chain disruption during the past year, with one in four exceeding ‎US$1 million in losses, the report found that almost half of survey respondents in Asia Pacific did not insure their losses.

Partnering with BCI for the eighth year, the annual report is regarded as one of the most authoritative benchmark reports in this business area. The key findings for Asia Pacific (APAC) this year are:

  1. IT/Telecom outages was named as the number one cause of supply chain disruption
  2. One in four organisations experienced cumulative losses of over ‎US$1 million
  3. 46% of organisations do not insure their losses, meaning they bore the full brunt of the cost
  4. Only 30% of disruptions occur with an immediate supplier
  5. 48% responded that top management have made commitments to supply chain resilience

Read more 6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

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Why Supply Chain Risk Management is Key to Supplier Management

While brand damage can be quite costly to the businesses whose sales rely strongly on the customer loyalty they generate from their brand strength, cost volatility and supply disruption is very costly to all manufacturers. In fact, in the latest 2015 study by the Business Continuity Institute, supply chain disruption is double in priority relative to other enterprise disruptions and over three-fourths of respondents cited that they had at least one recent (significant) disruption. The same percentage didn’t have full visibility of their supply chains.

While category management can address and even reduce supply chain risk by ensuring a chosen strategy has the right level of resiliency, prevention and agility, it cannot prevent risk or do much to eliminate the source of risk once something has happened. That can only be done by each party in the supply chain doing everything they can to eliminate the risk. In particular, a supplier needs to do all they can to minimize the risk on their end.

However, not all suppliers are as advanced in supply chain management, and in particular, risk management as the buying organization. That’s why good supplier management combined with SCRM is key. Good risk management is a combination of risk prevention and risk mitigation when a risk is detected. Risk prevention involves selecting suppliers, products and services that are low risk and risk mitigation involves taking action as soon as an indicator is detected.

A supplier is not always good at mitigating or even detecting risk in its supply chain, or may overlook an obvious sign that an observant buyer would not, which is why proper supplier management is key. This begins even when qualifying suppliers. Including risk criteria related to the supplier and supplier location gives a good indication of a supplier’s the risk level. Besides the supplier qualification criteria, supply location-related risks provide an overview on potential threats like natural disasters, political situation, sanctions or economic risk. This gives buyers the chance to take preventive actions.

Read more at Why Supply Chain Risk Management is Key to Supplier Management

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5 Critical Supply Risk Mitigation Principles for Your Sourcing Process

Supply chain risk management (SCRM) is becoming a top priority in procurement, as organizations lose millions because of cost volatility, supply disruption, non-compliance fines and incidents that cause damage to the organizational brand and reputation.
Bribes to shady government officials, salmonella in the spinach and forced labor in the supply chain can all result in brand-damaging headlines that can cost an organization tens of millions in sales and hundred of millions in brand damage. And while reputation may only be important for name brands, cost volatility and supply disruption affect all manufacturers.

In fact, in the latest 2015 study by the Business Continuity Institute, supply chain disruption doubled in priority relative to other enterprise disruptions (48% of firms are concerned or extremely concerned). Roughly three-quarters of respondents said they had at least one disruption, and the same amount lack full visibility of their supply chains.

In the same study, 14% had losses from supply chain disruptions (e.g., natural hazards, labor strikes, fires, etc.) that cost over €1 million, and these disruptions can easily go up to nine figures. For example, Toyota estimates the costs for the recent Kumamoto earthquakes to be nearly $300 million. Imagine being out of stock on a product line that does $12 million in annual sales for two months. That’s $2 million in immediate lost sales and longer-term brand damage.

Risk management, and what is necessary for ongoing risk management, never gets operationalized, and as new suppliers get added, supply shifts and supply chains change, new risk enters the picture — risks that go undetected unless risk management is embedded in all key procurement activities, including sourcing. It is important to remember that:

1. When You are Sourcing, You are Really Changing Your Supply Chain Network

2. Supplier Risk is Only One Aspect of Supply Chain Risk

3. Your Sourcing Criteria Must Be ‘Protected’ and Risk Must Be Factored In

4. You Need to Cost the Risk” and Also Get It in the Contract

5. You Must Design a Monitoring System That is Part of Onboarding

Read more at 5 Critical Supply Risk Mitigation Principles for Your Sourcing Process

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How to recover from supply chain disruptions

Risk mitigation is a crucial component of supply chain management. Preparing for potential disruptions is one of the most important yet challenging tasks faced by company managers, especially since there is an abundance of possible situations threatening operations at all times.

Unfortunately, damage control planning is something many companies tend to neglect. Last year, a study conducted by the supply chain management team at the University of Tennessee found that only about 50 percent of businesses have a recovery process in place to reference in the event a facility’s operations are interrupted.

Importance of response planning
Companies of all sizes are susceptible to dangerous disruptions, with global supply chains being the most vulnerable. Which is why it is surprising that the report also discovered nearly all, or 90 percent, of surveyed organizations do not take potential risks into consideration when outsourcing.

It’s understandable that managers are generally more focused on improving day-to-day operations, such as customer service, identifying cost-savings opportunities and driving revenue. However, disruptions along the supply chain have the power to severely impact financial growth and overall performance.

Between natural disasters, security breaches, safety and regulatory compliance and system failures, it is virtually impossible to anticipate what will be affected and when attacks may occur. But the best approach for supply chain teams to take is implementing strategic risk management practices that will help minimize monetary losses associated with disasters.

Read more at How to recover from supply chain disruptions

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2015 New Year’s Resolutions for the Supply Chain Industry

2015 New Year’s Resolutions for the Supply Chain Industry

Resolution #1 – Stop using the term VISIBILITY

People say that information is power. I beg to differ. I say, an informed decision is power. The visibility term has been over used. I’ve even heard some say that getting visibility to your supply chain is 80% of the challenge. They must not have run a supply chain. I see many supply chain leaders that have visibility, some in excel and some in automated tools. The ones that don’t have visibility can easily call the supplier and get it. Getting visibility isn’t the challenge. The real 80% challenge is “what are you doing with the visibility?”

Resolution #2 – Read only ONE “Cool Theme” report

In 2015, I resolve to read only one Cool Theme report. I’m tired of research analysts peddling these themes as a means to gain an edge on readership. Yet, I watch the audience during some of these Cool Theme presentations. And, half the people are on their smartphone working core issues back home, while the Analyst is talking about how supply chains should save the Panamanian golden frog, reduce the ozone layer, produce products with plastic wire from 3D printers and generate forecasts from Facebook posts!

Resolution #3 – Stop moaning about Bad Data

Let’s face it, everyone has some form of bad data. And, when you include all your tiered suppliers, they have bad data. The one constant is that you will never fix all the internal and external bad data. Yet, I still hear supply chain leaders say they need to focus first on fixing the data. I’ve seen many presentations from “Top 25” supply chains and how they’ve cleaned data, and why they should be considered a top tier supply chain story.

Resolution #4 – Fix the Disruption you can influence, not the Disruption you are concerned with

There are two types of disruptions. That which you are concerned with, and that which you can influence.

Volatility, regulation, geopolitics, economics, energy, and the list goes on. These are in your Circle of Concern. They happen, and you should be concerned. Yet, many supply chain leaders face fail to focus on the Circle of Influence, the area where you can make a difference.

Resolution #5 – Scrap the Talent Research, Make Planners more Productive

After reading all the Talent Research done in 2014, the topics of attrition, retiring professionals, and university-business alignment, I notice a big gap. The one thing missing in all this Supply Chain Talent research is the concept of being more productive with the talent you already have.

How can every supply chain improve productivity? In every supply chain I’ve seen in my past 25 years, there’s one constant – they all use some form of Excel – mostly to search for exceptions. Planners spend half their day dumping ERP and BI data into Excel, and then search for exceptions.

What are your resolutions? Share with us by leaving comments or contact us for a discussion.

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