The Most Common Failure in a Disaster or Crisis

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Failure to control critical supply chain

jackhealeyBy Jack Healey, Partner, Genesis Management and Firestorm Expert Council Member

Failure to control critical supply chain activities is the most common failure in a disaster or crisis causing the majority of ALL business interruptions.

While today’s global economic engagement has exponentially expanded the risks to businesses and their supply chains, the threat of a crisis or disaster compounds the already critical need to plan for any eventuality in order to mitigate adverse effects and ultimately, the survival of operations.

In a recent survey of senior supply chain executives conducted by Genesis Management and Firestorm, our research found that a company’s supply chain is the source of well over half of all business crises and disruptions. Suppliers, in the expanding supply network, are the largest source of these supply chain failures. Companies do not fully understand, track, or analyze the inherent risks embedded within their supply network, especially in a crisis or disaster event.

Genesis Management logoIdentified points included:

  • Illusions: There are illusions as to the risks which companies monitor and those which ultimately affect the supply chain.  Planning tools do not support the risk profiles inherent in the supply chain, and few companies have adequate, auditable metrics.
  • Visibility: There is a lack of visibility into the ever expanding supply chain and the risks associated with the supply network. Management does not understand – nor do the suppliers understand – the risk inherent in their supply chain.
  • Confusion: There is confusion in that management views the supply chain as strategic; companies use internal metrics to measure risk and do not have a good benchmark to evaluate the risk in their supply chain.

Today, not only do you need to understand the financial stability of your supply base, at all levels, but also the vulnerability to your business’ continuity of supply issues.  These issues arise from a number of decisions within the procurement or sourcing organizations which may, or may not, be driven from a sound strategic view.

Single sourcing, global sourcing, scarce supply of raw materials or many other issues may be significantly more important to the survival of the company than any price negotiation.  It is critically important that the risk assessment of the supply chain, with special emphasis on sourcing, be well documented and understood in order to mitigate these risks in an appropriate proactive manner. 

We are hosting a webinar on this critical subject on December 12th – The SUPPLY BASE: Managing Risk & Value – and encourage you to join.

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