By Daniel Hunter
Business disruptions are costing UK businesses an average of £200,000 a year. That’s according to The Weakest Link: UK Plc’s Supply Chain, a report published by Zurich Insurance that explores the impact of supply chain disruptions on mid-corporate businesses in the UK.
The report is based on in-depth research amongst 500 businesses with annual revenues of between £5 million and £300 million across manufacturing, technology, food and beverage, sport leisure and entertainment and wholesale businesses.
Across all five sectors, 88% of organisations surveyed have experienced significant disruptions to their supply chain, with the top three common causes being product quality incidents (57%), adverse weather (45%) and unplanned outage of IT (39%). The average length of disruption experienced by the companies surveyed is five weeks.
The businesses that took part in the study reported an average of 48 critical suppliers, with the majority (80%) describing their supply chains to be either very important or critical to their business.
For many organisations, the impact of these sorts of disruptions is profound. Almost two thirds (60%) experienced loss of orders and sales, followed by reputational damage (43%) and increased operating costs (43%). This translates directly into cost for businesses, with manufacturers, who generally have more complex and critical supply chains, taking the biggest hit at £228,608 on average over the past 12 months. This could be understated as it fails to take account of reputational damage costs.
Despite the importance of their relationships with suppliers and the impact on the bottom line, over half (55%) of the businesses surveyed have not reviewed their supply chain within the last six months, citing ‘not having enough time’ and ‘too expensive’ as the main reasons for not doing so.
“The lack of preparation and business continuity planning amongst businesses, particularly those who are highly dependent on suppliers, is alarming," Nick Wildgoose, Global Head of Supply Chain at Zurich said.
"This is despite high profile events such as the Volcanic Ash cloud, the Japanese tsunami or the Thai floods, for example. Businesses need to map out their key suppliers and plan for the worst case scenario, or suffer significant disruptions and associated financial impacts.”
Dave Carey, Head of Corporate Insurance at Zurich said: “The research shows that mid-corporate businesses, across a variety of sectors, are still prone to severe supply chain disruptions that can dramatically affect their bottom line. A well managed and maintained supply chain is essential to the efficient workings of a company. However, the failure to prepare for the worse scenarios can have devastating consequences that resonate across a business, regardless of size.
“It is clear that supply chains are UK Plc’s weakest link, and businesses must heed the advice of experts, so that they are fully prepared for any disruption that may occur. This will help both individual companies and the UK economy long into the future.”
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