AS MOST companies are seeking to reduce costs and improve working capital management, while at the same time relying increasingly on their suppliers, the most successful supply chains are dependent on efficient risk management.

This reliance on suppliers is likely to involve a combination of some of the following aspects: global sourcing; single sourcing; partnership approach; and just-in-time (JIT) operations.

These operations are being carried out against a current background of market shortages and complexities within supply chains. It means that the actions you are taking to drive out costs from a supply chain are likely to be driving risk in.

A number of studies show that the impacts on share price and profitability are very significant, and could result in as much as a 30 per cent share price reduction against a benchmark group of companies.

It is critical that UK firms, who all rely on their supply chains to some extent, ensure that they have the right supply chain risk procedures in place.

For example, do you know who your critical suppliers are, and how much their failure would impact your company’s profits? Have you ever fully mapped your critical supply chains upstream to the raw material level, and downstream to customer level?

In assessing your supply chain risks you should consider the following: information/financial flows; assets and infrastructure; organisations and inter-organisational networks; and macro issues including economic and political.

Better understanding of your supply chain is not just about risk management; it is also about performance management, since you are increasingly competing through your supply chains.

Zurich is already working with a number of companies to help them protect themselves against the frequency and impacts of supply chain disruption. These supply chains can be impacted in a variety of ways. It could involve physical events, such as the recent issues following the earthquake in Japan, and non-physical, such as strikes, insolvency and failures in logistics. Zurich has worked with UK companies on an innovative supply chain insurance product that reflects the changing business model now being operated.

Have you done enough to ensure the life support system of your organisation, its supply chain, is protected?

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