Business disruptions are costing mid-size UK wholesalers an average of £189,000 each a year, according to a report published today by Zurich Insurance.
The Weakest Link: UK Plc’s Supply Chain report is based on research amongst 500 businesses with annual revenues of between £5m and £300m 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. Eighty four per cent of wholesalers also reported significant disruptions, citing the top three common causes as product quality incidents (62%), adverse weather (42%) and unplanned outages of IT (37%). The average length of disruption experienced by the wholesale companies surveyed is four weeks.
The wholesalers that took part in the study reported an average of 67 critical suppliers, the highest number across all sectors (the average being 48), with the majority (82%) 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, said Zurich Insurance. Almost two thirds (64%) experienced loss of orders and sales, followed by reputational damage (40%) and loss of market share (33%).
Of all sectors surveyed, wholesalers most often suffered a loss of market share, suggesting they are most vulnerable to permanently losing customers following a supply chain disruption.
Despite the importance of their relationships with suppliers and the impact on the bottom line, over half (54%) of the wholesale businesses surveyed have not reviewed their supply chain within the last six months, citing ‘not having enough time’ and ‘too expensive’ as two of the main reasons for not doing so.
Nick Wildgoose, global head of supply chain at Zurich, said: “The lack of preparation and business continuity planning amongst businesses, particularly those who are highly dependent on suppliers, is alarming. 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 supply chains are UK Plc’s weakest link, and businesses must heed the advice of experts, so they are fully prepared for any disruption that may occur. This will help both individual companies and the UK economy long into the future.”