Thursday, 19 January 2017

Analysis: The Knowledge – SMEs unprepared for supply chain disruption

Supply chain management has risen up the agenda for larger organisations in recent years, after major catastrophes such as the 2011 Thai floods in 2011 and this year’s explosions in Tianjin, China.

With such events causing significant disruption, risk managers have looked more closely to identify pinch points in their supply chains, such as single source suppliers.

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Small businesses are also vulnerable. Two thirds of SMEs are unprepared for supply chain failure, according to a survey by the Chartered Institute of Procurement and Supply.

It also found that UK businesses with close supplier relationships are 1.5 times more likely to have avoided a major supply chain crisis in the past 12 months and four times more likely to have complete visibility of their supply chain.

Higos head of commercial lines Chris Wilde said: “I’ve seen extreme cases when clients are dealing with a customer for a large percentage of their business, or they have a sole supplier of a particular product, so we’ve had to consider what would happen should the premises of the customer or supplier be damaged.”   

While suppliers’ extensions are available in most business interruption policies, these typically only offer a small amount of cover. And, generally, such policies are only triggered when the supplier’s premises is physically damaged.

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