Tuesday 14th August, 2012

Economic shocks and natural disasters lead to increase in business continuity planning

Increasing numbers of manufacturers are bringing production back in-house and increasing their hunt for local supply capability in response to increased disruptions to supply chains caused by recession and natural disasters according to a major survey released today.

Key findings

• 82% of companies see supply chain disrupted by recession, 60% by local disruption
• Two fifths of companies see a major supplier fail
• One third of companies see supply chain risk as Board critical
• 40% of companies bring production back in-house
• Quarter of companies increase use of local suppliers

The survey, released by EEF, the manufacturers’ organisation, highlights the globalised nature of manufacturing and its supply chains, a trend that has been on the increase in recent years. This brings the potential for disruptions to cause business continuity risks and the survey shows companies are now very alive to future threats to supply chain management with one third of companies viewing it as an issue of Board level attention

As a result of economic events and natural disasters in recent years that have had tangible impacts on revenue, orders and meeting customer requirements, companies are reviewing their value chain and supplier strategies. This has led to two fifths of companies bringing production back in-house, whilst a quarter have increased their use of local suppliers.

According to EEF, this could give a real window of opportunity to build manufacturing capacity in the UK and reverse some of the hollowing out of supply chains seen in past few decades. This would provide an important win – win for companies looking to increase control and visibility over key elements of the production process; and the economy, which needs this high value activity to generate sustainable growth.

Commenting, EEF Chief Economist, Ms Lee Hopley, said:“Supply chains have become increasingly globalised for manufacturers. This brings a range of benefits but there are risks attached when things go wrong. In recent years manufacturers have been hit by a host of unforeseen events, which has seriously tested their supply chain monitoring and business continuity planning.

“This can also create opportunities to re-shore production and rebuild key manufacturing with companies bringing some production in-house and using local supply chains. We need to capitalise on this opportunity by removing obstacles for manufacturers looking to expand capacity or diversify into new areas and, by creating a business environment that pulls in every pound of vital investment to our economy. “

Companies have reported damage to productivity, revenue and orders from a range of local, international and economic disruptions to their supply chains over the past two years. This has led a vast majority of manufacturers to assess where potential vulnerabilities might lie and take steps to shore up the resilience of their whole supply chain.