Seventy-two per cent of FTSE 100 companies list threats to their supply chains amongst their principal risks, shows new research by supply chain management consultancy INVERTO, part of Boston Consulting Group.
Recent disasters such as the Red Sea crisis, the Ever Given’s blockage of the Suez Canal and the COVID pandemic caused significant disruption to global supply chains. INVERTO says that this succession of crises has highlighted to boards just how fundamental the smooth running of supply chains is to the profitability of companies.
Says Lina Tilley, Principal at INVERTO: “The severity – and short notice – of disruptions in the Suez Canal and Red Sea were real wake up calls for businesses. They were a powerful reminder that a geographically distant and narrow supply base can become a major business risk.”
Just 54 FTSE 100 companies provide shareholders details on report on how they are mitigating their supply chain risks
Says Lina Tilley: “One way companies can reduce their supply chain risks is by having alternative supply chains. This can include building multiple supply chains in different countries to ensure that an unexpected impact on one doesn’t become a business-critical event.”
The risk management strategies reported by FTSE 100 companies in the past year include:
- Regular meetings with suppliers to ensure potential risks are shared and monitored
- The compilation and updating of a ‘risk register’, which is used to document the risks facing particular suppliers
- Holding higher levels of ‘buffer’ stock to mitigate the impact of short-term crises
- Having diverse supply chain streams to ensure damage to one does not cause business interruption
Many businesses are also looking at how technology can be best used to prevent damage to their supply chains. Other measures mentioned in the annual reports of FTSE 100 companies include:
- Rollout of cyber security measures to protect supply chain businesses – not just their own business – from cyber attacks
- Increased use of AI in designing and monitoring of supply chains
- Use of algorithms to identify and monitor raw materials that are of high risk of possible disruption
- Due diligence of the supplier’s financial resilience and the resilience of the suppliers infrastructure
A number of the FTSE 100 companies confirmed that supply chain risks are discussed at board level, both within the executive committee and within the audit committee.
To learn more about the current state of Supply Chain Risk Management, INVERTO is conducting a supply chain risk management survey of businesses. To fill out the survey, click the link.
For more articles like this, visit our Leadership channel.
