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Majority of companies suffered supply chain disruption in 2011: Survey

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A large majority of companies, 85%, said they had suffered at least one supply chain disruption during 2011, according to a survey carried out by Zurich Financial Services Group and the U.K. Business Continuity Institute.

And 40% of those disruptions originated from below the original supplier, the study, published Wednesday, showed.

Zurich and the Caversham, England-based BCI surveyed 559 companies from 62 countries across 14 industry sectors.

Adverse weather was the most common cause of supply chain disruption, cited by 51% of respondents.

Unplanned IT or telecommunications outage was the second-most common cause of a disruption, cited by 41% of respondents, while 21% cited transport network disruption, and another 21% cited earthquake or tsunami as a cause of one of their supply chain disruptions.

The leading sources of disruption varied from sector to sector, the study showed.

For the financial services sector, unplanned outage of IT of telecom systems was the most common cause of disruption, while for the manufacturing industry a product quality incident was the most frequent cause of disruption.

For the retail and wholesale, IT and communications, transport and storage and government sectors, adverse weather was the most common cause of a supply chain disruption.

Respondents were asked to detail at what level in the supply chain a disruption originated, and 265 of the respondents were able to identify the tier in the supply chain in which disruption occurred for 327 incidents. Of those events, 61% originated at a Tier 1 supplier, while 30% originated at a Tier 2 supplier and 9% at a supplier in Tier 3 or even further down the supply chain.

Loss of productivity was indentified as the primary consequence of supply chain disruption and was cited by 49% of respondents as a major effect of disruption.

More than one-third of respondents, 38%, said supply chain disruptions had led to increased cost of working, while 32% said an event had led to loss of revenue, another 32% had experienced customer complaints and a further 32% said their service outcome had been impaired by a supply chain disruption.

For most—83%—of the companies surveyed, the cost of a significant single disruption to their supply chain in 2011 was less than €1 million ($1.4 million), while 14% said the cost was between €1 million and €10 million ($14.2 million) and for 2% the cost was between €51 million ($72.2 million) and €100 million ($141.5 million).

Just 1% of respondents said the cost of a single disruption reached more than €100 million.