Understanding and reducing the risk of supply chain disruptions

Abstract

Natural disasters can wreak havoc on business operations. When civil unrest swept the UK in August 2011, the effect on business was stark, losing the retail sector £300m in unexpected costs and lost revenues. On the other side of the world, the natural disaster that hit Japan in early 2011 is estimated to have run up costs in the region of £189bn in repairs. Beyond this, the earthquake and its aftermath shattered supply chains, with technology companies expecting delays of up to six months before business could resume fully. It is impossible to predict incidents like these, but businesses can help mitigate disruption in the supply chain by undertaking business continuity management (BCM). A flexible supply chain is essential when it comes to BCM — whether it means being able to cope with altering transport routes at short notice, or finding or replacing a supplier at the last minute. Understanding the supply chain is critical when responding to major impacts that affect supply chains in multiple points — like IT system failures and country-wide fuel strikes. Businesses should carry out detailed business impact assessments and risk assessments right across the end-to-end supply chain and not just at key single points of failure. It is an intensive process that needs dedicated resources and ownership at the highest level. Recognising this, DHL has designed a 10-step process, which it has implemented across its global supply chain business. This paper provides an overview of what a supply chain really looks like, what can cause disruptions and how far up/down the supply chain companies need to go with their BCM planning.