A successful CEO knows that a company’s strength doesn’t rely only on its present capacity to deliver goods and services, but on its ability to come back from difficult situations. In the logistics business, it is not uncommon for a logistics manager to have situations such as power shortages, adverse weather, data breaches or third party issues in the rest of the transport network, which cannot only impact their present deliveries but can threaten their future productivity and insurance premiums.
This capacity – commonly defined as “resilience” critically relies on visibility and transparency, monitoring and intelligence throughout the entire supply chain, a practice that must be integrated in the culture of both customers and suppliers.
The Supply Chain Resilience Report 2015, published by the Business Continuity Institute (BCI) surveyed 547 executives and managers from 67 countries. It found out that the same amount of companies who had suffered a disruption at least once (74%) lack full visibility of their supply chain (72%).
One of the biggest challenges to resilience is visibility. The term “resilience” is, as Martin Cristopher and Helen Peck, from the Cranfield School of Management define it, ‘the ability of a system to return to its original state or move to a new, more desirable state after being disturbed.´
According to fellow Cranfield professor Richard Wilding, the responsiveness of a supply chain is built on four pillars:
- Design & engineering
- Risk management culture
These build the foundations for transparency in a given organization and promote a culture of continuous monitoring and intelligence.
In reality, according to the report, these foundations fail to be a common practice. One out of three companies fail to analyze the source of the disruption while only one out of four companies report incidents throughout their supply chain.
This can have important operational and financial consequences. The report found out that the most common consequence of these disruptions was a loss of productivity (58%), customer complaints (40%), increased cost of working (39%) and loss of revenue (39%). In turn, 58% of these cases, respondents reported that organizations do not insure losses from supply chain disruption.
In summary, the most important recommendation of the report is that more work must be done to ensure transparency and accountability. The question is how?
These studies reveal that organizations with a supply chain Business Continuity – that is, planning activities to ensure they can continue their functions after a serious incident- are more likely to engage in behaviors that increase visibility, mitigate the impact of losses, and exhibit top management commitment essential to resilience. In short, planning before a crisis in advance can save money, but can save even more when incidents are anticipated with detailed reports from previous disruptions.
Most importantly, visibility is essential throughout the supply chain network of suppliers. As the study reveals that these disruptions increase when organizations rely on a greater numbers of high-value suppliers, but lack to engage in more visible monitoring practices in the lower tiers of their supply chain. Most of the time, the loss of control resulting in disruptions come from these oversights and a visible; transparent; engaging; continuous culture of monitoring and intelligence can dramatically reduce risks and increase a company’s resilience and reduce losses.
Have you suffered serious disruptions in your company? How have you managed to come back and respond? I would like to hear about your experience. Let me know by leaving a comment below.