Business disruptions are costing each ‘mid-size’ UK food & beverage company an average of £151,000 a year, says a new report.
The report – The Weakest Link: UK Plc’s Supply Chain, published by Zurich Insurance – explores the impact of supply chain disruptions on mid-corporate businesses in the UK.
It's based on in-depth research among 500 businesses with annual revenues of between £5m and £300m across manufacturing, technology, food and beverage, sport, leisure & entertainment, and wholesale businesses.
Across all five sectors, 88% of organisations surveyed have experienced significant disruptions to their supply chain.
80% of food and beverage respondents in this sector reported significant disruptions, citing the top three common causes as product quality incidents (68%), adverse weather (49%) and unplanned outage of IT (34%).
The average length of disruption experienced by the F&B companies surveyed is three weeks.
The food and beverage companies that took part in the study reported an average of 41 critical suppliers, with the majority (75%) describing their supply chains to be either very important or critical to their business.
For many organisations, the impact of these sorts of disruptions is significant. Almost three quarters (74%) experienced loss of orders and sales, followed by reputation damage (43%) and increased operating costs (33%).
Of all sectors surveyed, food and beverage businesses most often suffered a loss of orders and sales. This translates directly into cost for businesses, with food and beverage organisations taking an average hit of £151,000, which could be understated as it fails to fully take into account reputation damage costs following a supply chain disruption.
The bottom line
Despite the importance of their relationships with suppliers and the impact on the bottom line, nearly half (44%) of food and beverage businesses surveyed have not reviewed their supply chain within the last six months, citing ‘too expensive’ and ‘not having enough time’ as two of the main reasons for not doing so.
Commenting on the findings, Nick Wildgoose, global head of supply chain at Zurich, said: “The lack of preparation and business continuity planning among businesses, particularly those who are highly dependent on suppliers, is alarming. This is despite high-profile events such as the Volcanic Ash cloud, the Japanese tsunami or the Thai floods, for example.
"Businesses need to map out their key suppliers and plan for the worst case scenario, or suffer significant disruptions and associated financial impacts.”