30 June 2015

Despite the ever-present possibility that serious problems will affect their business, two-thirds of British companies have no strategy for coping with a supply chain crisis.

With two years having passed since the horsemeat scandal put supply chains in the spotlight, the Chartered Institute of Procurement and Supply (CIPS) has warned that many firms are still woefully unprepared for something going wrong with their suppliers.

Research by CIPS shows that 66% of UK businesses have no Plan B when it comes to dealing with emergencies. Of that figure almost half (45%) told CIPS they do not have a risk mitigation strategy all the way down their supply chain.

Risk mitigation strategies ensure businesses and countries maintain important supplies during an unexpected crisis (such as a conflict or natural disaster) which might impact on foreign suppliers.

Commenting on the findings, David Noble of CIPS said that, as UK companies turn increasingly to suppliers in emerging markets to maintain their price competitiveness, they are becoming more exposed to reputational risks.

Those risks include poor health and safety standards for workers, enforced slavery, bribery and corruption, and environmental degradation.

The CIPS survey also found that only 11% of UK businesses have a close relationship with suppliers at all stages of their supply chain. The majority (65%) either have relationships with their main suppliers only or do not have any relationships with suppliers at all.

That leads, CIPS suggested, to buyers being disengaged and, ultimately, raises concerns about best practice in supply chain management.

This requires a thorough understanding by companies of who their suppliers are, Mr Noble said. He backed his argument by citing evidence that 67% of supply chain managers with strong supplier relationships up to tier three and beyond have avoided major supply chain crisis in the past year.