Is Your Supply-Chain Continuity Plan Short-Sighted?

The record floods in Thailand last fall left more than 1,000 manufacturers worldwide high and dry as they relied on electronic parts produced in the affected regions. It was estimated that between 40 percent and 60 percent of the global hard drives market relied on the region. When the floods compromised factories and logistics in the region, consumers of countless products were affected. Perhaps most notably, Honda postponed the launch of its 2012 CR-V - and blamed the waters on its plummeting profits for the year.

As manufacturers look to cut costs, their supply chain issues are growing. According to one Zurich survey, 85 percent of manufacturers surveyed suffered supply-chain disruptions in 2011 - up from 79 percent a year earlier.   

Finding ways to diversify geographic souring for a key product like hard drives may seem an obvious supply chain solution, experts say. But experts say business leaders sometimes overlook obvious products on which their organizations rely. For example, a hospital may have a thorough plan for dealing with a power outage, but forget that they cannot open their doors without latex gloves. 

"Without the right continuity plan, a company could face the inability to supply its customers," says Linda Conrad, Director of Strategic Business Risk, Zurich Global Corporate in North America. "Other potential consequences could be delayed product launches and perhaps even opening up directors and officers to lawsuits. We find that companies are often very surprised to learn where their supply chain risks are. One customer underestimated by tenfold the potential impact of the loss of one supplier that happened to be connected into multiple product lines." The survey found that 40 percent of disruptions originated below the immediate tier one supplier.

To begin to assess your supply-chain risk, ask these questions: