Supply chains are a big area of vulnerability, yet many small and medium businesses seem to be underestimating the potential damage these disruptions could cause. According to the third annual Global SME Survey carried out by Zurich, 55% of American small and medium-sized enterprises (SMEs) polled do not think that losing a main supplier would impact their business seriously.
Another Zürich study revealed that nearly three fourths of businesses experienced at least one disruption to their supply chain during the past year, and 14% of them suffered losses that exceeded $1 million.
What is behind the supply chain disruptions in question? The top cause, accounting for 64% of supply chain disruptions, was unplanned telecommunications and IT outages. This was followed by data breaches and cyber attacks at 54% and adverse weather at 50%.
Don’t Drive Blindfolded
Zurich’s Director of Strategic Business Risk Linda Conrad said that many businesses are so concerned about managing their bottom line that they fail to give supply chain operational risks the weight they deserve, something she likens to “driving blindfolded”.
Moreover, she added that as global trade becomes increasingly complex, especially when it comes to how goods travel, it’s a question of when and not if a business will be hit by a supply chain disruption.
To understand the weight of such a disruption, consider this: Studies have shown that roughly 40% of businesses that are hit by significant supply chain disruptions will ultimately fail. SMEs are particularly vulnerable because they tend to have limited cash flow cushions. Making matters worse is the fact that many supply chain disruptions stem from causes that are not insured.
The top five consequences of supply chain disruptions are productivity losses, customer complaints, higher working costs, revenue loss, and damaged service outcomes.
Many SMEs appeared to be out of touch with their supply chains, with the report finding that one out of every 10 businesses are unable to name their key suppliers, while seven out of 10 lack visibility over their entire supply chain. Is it time for you take a closer look at your supply chain?
This blog post was based off an article by Risk & Insurance. Read the full article here.