How secure is your supply chain?

In recent years we have seen earthquakes, tsunamis, volcanic ash clouds and now super storms. It is inevitable that humanity will face other catastrophes but we don’t know what, where or when it will strike.  Add to this international political uncertainty and you have an unpredictable cocktail over which we have little control.

What is clear is that much of British industry relies on international suppliers for a wide range of components and products and this creates an inherent vulnerability.

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This vulnerability was particularly highlighted following the Japanese earthquake and tsunami of March 2011 where many British businesses struggled to satisfy orders and indeed the modern trend towards a lean inventory, or “just-in-time” model increased the risk

If your business relies on international suppliers a question you should be asking is how do we mitigate the risk?

Supply chain risk management can be very complex with many variables. As a minimum we would recommend a supply chain vulnerability audit which could include a “what if” analysis that would identify your main areas of exposure. At this juncture you could consider options such as a comparison of holding stock against the risk of losing key customers. Alternatively you may seek to identify similar suppliers in other geographical locations.

It is also possible to insure against supply chain failures that have a financial impact on your operations. The cover forms part of business interruption insurance and is usually restricted to property damage and focuses on incidents outside your control. The policy would pay for a loss of gross profit in the event of an insured interruption occurring at a suppliers premises.

It’s possible to insure suppliers on either a specified or indeed unspecified basis and increasingly it is also possible to extended insurance to include such items as political risks and cyber attacks.

Unfortunately many policies do not adequately cater for this type of risk exposure and often only insurance brokers with a specialist understanding of business interruption cover can provide adequate advice.

Andy Morley headshotShould you be interested in learning more about supply chain risks please do not hesitate to contact ProAktive on 01302 341 344.

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