Aberdeen report indicates supply chain disruptions plague most companies

Nearly all of the companies surveyed had a supply chain disruption in the past year, with more than half suffering financial losses as a result

Allison Manning -- Logistics Management, 10/15/2008

BOSTON—When it comes to disruptions in the supply chain, few companies can afford to ignore possible risks and hope for the best, according to a recent study by Aberdeen Group, a Boston-based supply chain consultancy.

Nearly all, or 99%, of the companies surveyed had suffered a supply chain disruption in the past year, with 58% suffering financial losses as a result.

Viktoriya Sadlovska, lead co-author on the study, said she was struck by the number of disruptions companies reported, with almost all of the 138 checking off at least one.

The most commonly reported disruptions were:

Supplier capacity not meeting demand (56% of respondents)

Raw materials price increases or shortages (49%)

Unexpected changes in customer demand (45%)

Delayed/damaged/misdirected shipments (39%)

Fuel price increases or shortages (35%)

Best-in-class companies were twice as likely to suffer no major impact in the form of financial or market share loss or brand damage as a result of disruption.

“Overall, there's still a pretty big gap in supply chain risk management,” Sadlovska said.

The study identified a number of risks, including logistics congestion and capacity, risk profile of suppliers, fuel prices, risk profile of a country and non-environmental catastrophic events, and found that best-in-class companies were between 28 and 43% more likely to manage those risks.

“Fewer than a third of companies said they were actively managing any of those risks,” Sadlovska said. “That's very alarming to me.”

A disconnect across the organizations contributes to the lack of management, Sadlovska said.

Even though more than a third of companies reported having an enterprise risk department, only 3% said that department was leading in managing supply chain risk management initiatives.

Allison Manning is Associate Editor of Modern Materials Handling, LM’s sister publication.