Supply Chain Disruptions Cost Millions—Here’s How they Add Up

August 11, 2021
interos-blogger

Ensuring supply chain risk management (SCRM) methods are robust enough to keep threats at bay and help organizations stay secure is a critical need today. But a succession of large shocks—including the COVID-19 pandemic, multiple high-profile cyber breaches, and ongoing international trade disputes—have exposed deep supply chain vulnerabilities and revealed shortcomings in SCRM and third-party risk management (TPRM).

Surprisingly, when shocks do occur, little is known about the true extent of the disruption, the wider organizational costs, or damage extending beyond that of a financial nature. Our new whitepaper, “Supply Chain Disruptions and the High Cost of the Status Quo,” based on a survey of 900 enterprise decision makers about their risk management practices, fills in many of those knowledge gaps:

  • On average, global supply chain disruptions cost enterprise-level organizations $184 million in lost revenue per year
  • 83% have suffered reputational damage because of supply chain problems

Looking Deeper at Disruption Data

Our survey found that supply chain events impact geographies and industries in unique ways.

The average revenue loss rises to $228 million for U.S. organizations, compared to UK and DACH where it costs $146 million and $145 million, respectively. There is also a large difference between sectors, with disruptions costing those in IT and technology ($194 million) and aerospace and defense ($193 million) more than financial services, where the average cost to revenue drops to $164 million. However, no matter the location of the organization or the sector they operate within, these costs are an unsustainable and debilitating expenditure.

The cost of supply chain disruptions extends beyond an organization’s revenue, as brand, reputation, and customer perception are also negatively impacted. It’s therefore no sur­prise that more than four in five (83%) of those surveyed say their organization has suf­fered reputational damage as a result of supply chain disruption. Again, those in the U.S. see the most severe impact in this regard, where 87% have suffered, compared to organi­zations in the Nordic countries where 77% say the same.

Understanding Supply Chain Risk Factors

The number of supply chain shocks has grown in recent years. Each disruption proves troublesome for organizations who are likely still reeling from the effects of the previous one. In fact, fewer than 1 in 10 enterprise organizations (6%) say they have not been impacted by supply chain disruptions over the past two years. We can attribute these disruptions across a variety of supply chain threats, with risk spread fairly evenly across all factors. To illustrate this, over the past two years, decision makers report that shocks have been spread across cyber risk and breaches (52%), financial risks (50%), and environmental/social/governance (ESG) (41%), among others.

Decision makers understand the critical need to use SCRM and TPRM to protect themselves against all types of supply chain risk. More than four in five (88% to 81%) believe it is important to guard against all six risk factors. This demonstrates that even if they are not directly impacted by every threat, decision makers understand the wide-ranging sources of disruptions to their supply chains.

Get More Data on SCRM/TPRM Practices and Improving Risk Mitigation

Our paper goes into more detail on the importance of visibility and supply chain risk management needs. It also includes current practices that are helping organizations mitigate risk. Get all the insights here.

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