Supply Chain Disruptions are on the Rise: One Consultant Explains Why
Since 2000, supply chain disruptions have been on the rise. Dr. Alan Punter, a risk management consultant with 25 years’ experience, carefully studied the rise to try to identify reasons. The study examined business-to-business processes and how automating these processes can benefit companies in the long run.
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According to Punter, as much as 60 to 70 percent of the cost structure of most businesses is tied up in the supply chain. An Accenture survey of 151 executives indicated that 73 percent of the companies represented in the study had experienced a supply chain interruption of some sort within the past five years. Punter’s analysis of supply disruptions between 2000 and today offer some insight into why.
Punter concludes disruptions are usually caused by one of the following factors:
- Business models are changing. Outsourcing production leads to less control over the flow and quality of supplies, leading to more disruptions in the process.
- Offshoring to certain countries means companies are depending on suppliers which have less concern about managing risks.
- Offshoring leaves companies’ supply chains at more risk due to natural disasters.
- More focus on cost and quality leads to less focus on risks. Too many companies rely on a few or a single supplier.
- The modern model of just in time delivery leaves no margin of error anywhere in the supply chain.
- Often, companies are seeking specialized manufacturing skills and end up with geographically clustered supply chains that are too interdependent.
- The size and complexity of the supply chain, with many companies depending on tier 1, tier 2, and tier 3 suppliers (and beyond) means most companies have little or no knowledge past tier 1.
- The Internet and social media are confusing the communications across supply chains.
Most industry analysts and consultants agree that automating business to business processes is a good move, but it needs to be part of a comprehensive risk management plan. [/show_to]
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